The past week saw a repeat of the market’s disappointment when the Fed walked back their expectation of interest rate cuts. This is the third? fourth? time this has happened.
Does that mean a Santa Claus rally as the market bounces back? Hard to say since the Treasury yield curve is now positive and rising and long-term yields (such as the 30 year mortgage) are not following the fed funds rate down.
The SPX remains in a historic bubble. However, the percent of SP100 stocks above their 200 day MA is falling, a market internal that shows widespread weakening. The NAZ bullish percent is falling.
The Fear & Greed Index has suddenly dropped into Fear from last week’s neutral. The USD is rising. The price of oil is decisively trending downward.
The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2024 was 3.1 percent on December 20. This strong growth prediction coupled with the inflation nowcast which is higher than the Fed’s target supports the Fed’s prediction of only 2 fed funds cuts in 2025.
I don’t see a Santa Claus rally shaping up in this Control Panel.
The METAR for next week is cloudy.
Happy solstice to all!
Wendy
