Market Momentum: Your Weekly Financial Forecast
Issue 13 / What to expect Sept 16, 2024 thru Sept 20, 2024
Weekly Wrap-Up
Market Volatility & General Sentiment: This week saw increased market swings, characterized by periods of notable pullbacks followed by strong rebounds. This was primarily driven by inflation data and expectations of upcoming Federal Reserve interest rate cuts. Despite the volatility, the broader stock market is still near all-time highs, suggesting a resilient underlying market sentiment.
Investors remained cautious due to persistent inflation, and this week's CPI data, while signaling some progress, suggested that the inflation fight isn’t over yet, particularly due to rising shelter costs. Core inflation remained stable at 3.2%, which is still above the Fed's 2% target.
Inflation Data and the Fed's Rate Decisions:
The inflation report showed modest progress, with prices rising 0.5% month-over-month due to rising shelter costs. However, prices for other key categories, such as used vehicles and medical care, showed improvement.
This data reduced expectations of a larger rate cut by the Federal Reserve, which was previously anticipated at 50 basis points. Markets are now more aligned with the view that the Fed will likely cut rates by 25 basis points during its meeting next week.
Sector Performance:
Information Technology was the standout sector, rebounding sharply by 7% this week, driven by renewed enthusiasm for AI and semiconductors. The PHLX Semiconductor Index soared 10%, fueled by positive comments from Nvidia's CEO and strong earnings reports from Oracle.
Defensive sectors such as energy lagged behind as growth stocks led the rally.
Bond Yields and Consumer Confidence:
Bond yields declined further, with the 10-year Treasury yield dropping to 3.66%, the lowest since June 2023, as the market priced in expected rate cuts.
Consumer confidence improved, with the University of Michigan’s Consumer Sentiment Index rising to 69.0, indicating growing optimism about the economic outlook.
Gold Prices:
The price of gold surged above $2,600 per ounce, reflecting investor demand for safe-haven assets amid market uncertainty and expectations of lower interest rates.
Looking Ahead: The markets are now focused on the Federal Open Market Committee (FOMC) meeting next Wednesday, where the Fed is expected to begin its rate-cutting cycle. While the size of the cut remains uncertain, with possibilities of either a 25 or 50 basis point reduction, the general expectation is for a more moderate approach.
Additionally, key economic data releases next week, including August retail sales and housing starts, will offer further insights into consumer demand and housing market conditions.
This Week’s Snapshots
Volatility
ETFs
Crypto
