2023-12-26 00:02:00
US Markets Prepare for Last Chance at “Year-End Rally” in 2023
As the last trading week of the year approaches, the S&P 500 and Nasdaq are gearing up for their final chance to add to the traditional “year-end rally.” The S&P 500 has seen a 3.5% increase in December, while the Nasdaq has only added 2%. However, back in November, both indices experienced significant gains of 8.5% and 12.5% respectively, leading some to believe that the rally may have already occurred the previous month.
In the realm of US macroeconomic indicators, the Personal Consumption Expenditures (PCE) index rose by 0.06% in November and dropped by 0.1% over the past six months, with core inflation running at just 1.9% in annual terms. Dr. Gil Michael Bafman, Chief Economist of Bank Leumi, believes that these figures suggest that inflation is on the decline and the possibility of Fed rate cuts is increasing.
Yoni Penning, Chief Transaction Strategist at Mizrahi Tefahot Bank, also noted that private consumption in the US managed to rise in real terms, despite expectations of a significant moderation due to the resumption of student loan payments. Moreover, Alex Zbzinski, Chief Economist at Meitav Investment House, predicts that the PCE inflation will reach the Fed’s 2% target in March 2024.
Interest rate expectations are dropping rapidly, as evidenced by a significant decline in inflation leading to a decrease in forecasted interest rates for central banks in various countries. In the US, household optimism remains high and is seen as a driving force for economic growth, despite concerns over factors such as higher interest rates and the expiration of excess savings from the pandemic period.
Yonatan Katz from Lidar emphasized that consumer confidence does not foresee negative impacts on unemployment, income, or consumption. With this optimistic outlook, the likelihood of six interest rate cuts next year, as priced in the market, is minimal.
As for corporate reports, no company with analyst coverage is expected to report in the last week of the year. This is a unique occurrence, as it marks the first time since 1997 that no covered company will report in the final week of the year.
Despite the positive outlook and market movements, analysts and economists are keeping a close eye on the developments, with varying opinions about the future trajectory of the markets and the economy as a whole.
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