The markets had a positive response last week due to cooler inflation and the possibility of rate cuts next year, which added to the year-end rally's gains. The Dow Jones Industrial Average increased by 2.92%, while the Standard & Poor's 500 saw a gain of 2.50%. The Nasdaq Composite index also grew by 2.85% during the week. Additionally, the MSCI EAFE index, which tracks developed overseas stock markets, added 2.75%.
Stocks gathered momentum last week after upbeat news from two key inflation reports. But the outcome of the Federal Open Market Committee (FOMC) meeting on Wednesday powered the week’s advance. The combination of the FOMC signaling three rate cuts in 2024 and dovish comments by Fed Chair Powell led to a sharp drop in bond yields and a spike in stock prices, with the Dow Industrials closing above 37,000 and setting an all-time high.4
The rally continued the following day as beneficiaries of lower rates, such as smaller capitalization stocks and real estate, rallied. A solid retail sales number, which reflected a strong consumer and supported the soft landing thesis, also boosted enthusiasm.
Last week, the stock market gained momentum thanks to positive news from two important inflation reports. However, the Federal Open Market Committee (FOMC) meeting on Wednesday had the biggest impact on the market's performance. The FOMC's announcement of three rate cuts in 2024, along with dovish comments from Fed Chair Powell, caused bond yields to drop sharply and stock prices to rise significantly. As a result, the Dow Industrials closed above 37,000, setting a new all-time high.
The rally continued the following day, with smaller capitalization stocks and real estate beneficiaries of lower rates performing particularly well. Additionally, a strong retail sales number, reflecting a robust consumer, supported the notion of a soft landing and further boosted market enthusiasm.
This Week: Key Economic Data
Tuesday: Housing Starts.
Wednesday: Consumer Confidence. Existing Home Sales.
Thursday: Gross Domestic Product (GDP). Jobless Claims. Index of Leading Economic Indicators.
Friday: Durable Goods Orders. Personal Income and Outlays. New Home Sales. Consumer Sentiment.
Source: Econoday, December 15, 2023
This Week: Companies Reporting Earnings
Tuesday: FedEx Corporation (FDX)
Wednesday: Micron Technology, Inc. (MU), General Mills, Inc. (GIS)
Thursday: Nike, Inc. (NKE)
Source: Zacks, December 15, 2023
Food For Thought
"I never try to please a certain audience. I think that's disastrous."
– Charles Schulz
Tax Benefit and Credits: FAQs for Retirees
After retirement, income taxes can be a source of confusion for many people. Some types of income that are subject to taxation include military retirement pay, pensions and annuities, individual retirement accounts (IRA), gambling winnings, bonuses and awards, alimony or prizes, and unemployment compensation. On the other hand, some types of income that are not subject to taxation include veteran’s benefits, disability pay for certain military or government-related incidents, worker’s compensation, and cash rebates from a dealer or manufacturer of an item you purchased.
Tip adapted from IRS.gov7
Healthy Living Tip
Practicing Gratitude in the New Year
Starting the new year with a list of resolutions may not be the best approach. Instead, consider examining the good things already present in your life by practicing gratitude. Psychologists define gratitude as a positive emotional response to receiving a benefit from someone. In positive psychology, gratitude is the human way of acknowledging the good things in life. Even if gratitude does not come naturally to you, it is a skill that you can learn.
There are numerous benefits to practicing gratitude, especially during stressful and uncertain times. Gratitude promotes positive emotions that can have physical benefits through the immune and endocrine systems. Studies reveal that when we focus on what we appreciate, the parasympathetic or calming part of the nervous system is triggered. This can have protective benefits for the body, including reducing levels of the stress hormone cortisol and increasing oxytocin, the bonding hormone involved in relationships that make us feel good.
Here are some excellent ways to start practicing gratitude in your daily life:
Tip adapted from PsychologyToday.com8
Riddle Of The Week
Ray slipped off of a 30-foot escalator and landed on a sidewalk. He was embarrassed, yet uninjured. How could this be?
Last week’s riddle: My first is twice in the apple but not once in the tart. My second is in the liver but not in the heart. My third is in Giant and also in Ghost. While I'm best when I am roast. What am I? Answer: A pig.
Photo Of The Week
Mountain lion in the southwest USA
Footnotes and Sources
2. The Wall Street Journal, December 15, 2023
3. The Wall Street Journal, December 15, 2023
4. CNBC, December 13, 2023
5. CNBC, December 12, 2023
6. CNBC, December 13, 2023
7. IRS.gov, December 11, 2023
8. PsychologyToday.com, December 11, 2023
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Weekly Market Insights: Positive Week Caused By Cooler Inflation
December 18, 2023