“It’s a short trip from the penthouse to the outhouse, but it’s the same distance back.”
-Paul Dietzel
Here’s what you need to know this week:
- Stocks touch new all-time highs before retreating
- A flurry of delayed economic reports takes center stage this week
Rate Reduction
The Federal Reserve slashed interest rates by 25 basis points (0.25%) as most analysts expected, bringing the fed funds rate to 3.50-3.75%:
Markets responded positively to the news: the S&P 500 closed at a new all-time high on Thursday while the Dow Jones and NASDAQ closed just short of their all-time highs. One interesting aspect of this rally was that the tech sector lagged behind most other sectors; tech has been the main driver of market gains this year, and a rotation into other sectors may indicate broadening confidence in the economy[1].
Chairman of the Federal Reserve Jerome Powell gave his customary press conference following the announcement of the rate cut and urged caution heading into 2026. During his presser he repeatedly emphasized that future cuts are less of a forgone conclusion and the Fed will be closely monitoring data before any more rate cuts. Additionally, the “dot plot”,which shows future rate cut projections from the Fed, showed only one projected rate cut in 2026, down from three expected cuts earlier this year[2].
Checkup
Markets are playing catch-up on economic data after most of the key economic reports were delayed due to the prolonged government shutdown, and this week we’re getting three major reports. The first two are the nonfarm payrolls (NFP) report for the months of both October and November which released yesterday morning. The reports showed the US economy losing 105,000 jobs in October and then gaining 64,000 jobs for the month of November[3]. Both October’s losses and November’s gains were larger than analysts’ estimates, highlighting the ongoing volatility in the job market. Additionally, the unemployment rate rose to 4.6%, the highest since September of 2021:
The other critical report is the Consumer Price Index (CPI) report for the month of November, set to be released tomorrow. This report has the potential to have an outsized impact on the markets because we received no inflation data for October. Wall Street consensus is that we will see monthly inflation at 0.25% and annualized inflation at 3.1%[4].
This week has the potential to set expectations for an additional rate cut from the Federal Reserve in January. The Federal Reserve’s dual mandate instructs them to keep unemployment and inflation low; interest rate cuts tend to alleviate unemployment but exacerbate inflation. *If* the CPI report comes in light, the Fed may look more favorably on a January cut and provide stocks a tailwind into the start of the year.
What Else
- The US and Ukraine continue to negotiate terms of an end to the war between Russia and Ukraine
- The Venezuelan tankers seized in the Caribbean appear to be part of the Venezuelan government’s effort to finance Cuba according to released documents
- At least 15 people were killed in Australia’s deadliest terror attack, an apparent attack on the Jewish community in Bondi Beach
- Israel announced it killed one of Hamas’ top leaders in Gaza over the weekend, seemingly breaking the terms of the ceasefire
- OU will play Alabama in the College Football Playoff this Friday, December 19th on ABC & ESPN at 7:00 PM CT
- Winter officially begins this Sunday, December 21st
What We’re Reading
The annual Geminid meteor shower is expected to reach its apex this weekend. Red, green and yellow fireballs will streak across the sky and may reach an average of 120 meteors per hour. Astronomers say the best viewing will be in the eastern sky, towards the constellation Gemini. Click below to learn more:
What’s Happening Downtown
This weekend is the final weekend of the Downtown Holiday Pop-Up Shops in Midtown. Don’t miss your chance to find great gifts for friends and family from dozens of local vendors! The market runs Friday through Sunday, click below to learn more:
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Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, CFP®, Brandon Ingerson, Bill Daniel, Sam Postich, Jenni Hess
Sources: [1] Yahoo! Finance [2] Bloomberg [3] CNBC [4] Morningstar