Pivot, PIVot, PIVOT!!!

Fed Chairman Jerome Powell addressed the press on Wednesday and the message was clear: Prepare for rate cuts in 2024. The Fed held steady on interest rate movement for this month, but the press conference carried a more dovish tone following a consistent diet of hawkish-to-neutral attitude in the previous monthly pressers. The key line from Powell that stuck out was:

“In our SEP, FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward. While participants do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table. If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 percent at the end of 2024, 3.6 percent at the end of 2025 and 2.9 percent at the end of 2026.”

For those not following these pressers word for word and month by month, that may not sound like much. But Mr. Powell knows market participants hang on every word or phrase, and that is as close as you will get to hearing him say, “Interest rates have peaked, and rate cuts are around the corner” until they actually happen. They are obviously still leaving the door open for more rate hikes if needed. But there were edible breadcrumbs left behind after this announcement that felt similar to the message that was sent when the Fed first started to raise interest rates and the target was insinuated to be around 5-5.5 percent, with the current rate standing at 5.25 percent.

Markets moved on this message. The stock market was up continuing a rally that started in early November. The Dow Jones reached new all-time highs and S&P was not far off.

The December U.S. dollar index tumbled from 104 Wednesday morning to just under 102 by Thursday afternoon.

Crude oil futures, which have been trending lower since mid-October, rebounded roughly $3.50 from Wednesday morning to Thursday afternoon, with January crude oil futures settling at $71.58. That was not enough to break the downtrend in crude oil prices. There continue to be question marks surrounding OPEC’s ability to keep prices from progressing lower with their “voluntary” rate cuts. Cracks of light continue to peak through the drawn curtains with signs of weaker demand potential and U.S. oil production gaining market share.

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