Fed Holds Rates Steady, Signals End To Hiking Cycle; Projects Interest Rates Falling To 4.6% By Year-End 2024
Portfolio Pulse from Piero Cingari
The Federal Reserve has maintained the federal funds rate at 5.25%-5.5%, signaling a potential end to the rate-hiking cycle. Inflation is reported to have eased, but remains above the 2% target. The Fed's new economic projections indicate a more optimistic GDP outlook for 2023 and lower inflation forecasts. The 'dot plot' suggests a median federal funds rate of 4.6% by the end of 2024. Markets reacted with the U.S. dollar and Treasury yields falling, while equities, gold, and ETFs related to these assets rallied.
December 13, 2023 | 7:14 pm
News sentiment analysis
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NEGATIVE IMPACT
Invesco DB USD Index Bullish Fund ETF (UUP) fell by 0.6% following the Fed's announcement to maintain interest rates, which led to a weaker U.S. dollar.
UUP tracks the U.S. dollar performance and typically falls when the dollar weakens, as indicated by the market's reaction to the Fed's decision.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The SPDR Gold Trust (GLD) soared by 1.2% as gold prices rallied, likely due to the Fed's decision to hold rates, which can decrease the opportunity cost of holding gold.
Gold and GLD typically benefit from a lower interest rate environment as it reduces the relative cost of holding non-yielding assets like gold.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The Invesco QQQ Trust (QQQ) edged 0.5% higher following the Fed's announcement, with the tech-heavy index benefiting from the rate decision.
QQQ, which tracks the NASDAQ-100, is sensitive to interest rate changes, and tech stocks often perform better when interest rates are stable or declining.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) rose by 0.6% as equities rallied in response to the Fed's decision to maintain interest rates.
SPY, which tracks the S&P 500, often rises when the Fed signals a pause in rate hikes, as it can lead to lower borrowing costs and support economic growth.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) rose by 0.9% as Treasury yields fell in response to the Fed's rate decision.
TLT tends to rise when Treasury yields fall, which often occurs when the Fed signals a dovish stance on interest rates.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80