Federal Reserve Meets Wednesday: Will Powell Signal Rate Cuts In 2024?
Portfolio Pulse from Neil Dennis
The Federal Reserve's final 2023 policy meeting is anticipated to maintain current interest rates, with markets seeking signs of future rate cuts in H1 2024. Analysts expect a dovish tone, signaling a potential rate cut by May. Economic data suggests a moderation in activity and inflation, with a cooling labor market. The dollar index has fallen, while the Invesco US Dollar Index Bullish ETF (UUP) is down and its counterpart, the Dollar Index Bearish Fund (UDN), has gained. The SPDR S&P 500 ETF (SPY) has rallied on hopes of lower rates. However, some analysts believe the Fed may push back against market expectations. November consumer price inflation data will be key to the Fed's decision, with inflation expected to have slowed further.
December 11, 2023 | 2:14 pm
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POSITIVE IMPACT
The SPDR S&P 500 ETF (SPY) has rallied 12% since late October, buoyed by the prospect of lower interest rates following a dovish shift from the Fed.
SPY, which tracks the S&P 500, is sensitive to interest rate expectations. A dovish Fed could lead to continued optimism in the equity markets, potentially benefiting SPY.
CONFIDENCE 85
IMPORTANCE 85
RELEVANCE 90
POSITIVE IMPACT
The Dollar Index Bearish Fund (UDN) has gained 3.1% since the November Fed meeting, benefiting from a weaker dollar and dovish Fed expectations.
UDN gains when the dollar weakens, which is likely if the Fed adopts a dovish tone. The anticipation of rate cuts could further boost UDN's performance.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
The Invesco US Dollar Index Bullish ETF (UUP) is down 1.8% since the November Fed meeting, reflecting a weaker dollar amid expectations of a dovish Fed stance.
The UUP tracks the performance of the dollar, which is influenced by Fed policy. A dovish stance typically weakens the dollar, potentially leading to further declines in UUP's value.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80