'Cuts Are Coming': 7 Economists On December Inflation Data, What It Means For The Fed, Markets
Portfolio Pulse from Piero Cingari
The December Personal Consumption Expenditures (PCE) price index showed inflation at 2.6% annually, with core inflation at 2.9%, suggesting disinflationary trends. Economists predict the Federal Reserve may cut interest rates, with the current Fed Funds Rate being 2.3% above core PCE, the most restrictive since 2007. Treasury yields rose, causing a decline in bond ETFs like TLT, while stock performance was mixed. SPY and QQQ are aiming for continued positive sessions.
January 26, 2024 | 4:00 pm
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POSITIVE IMPACT
The Invesco QQQ Trust (QQQ) experienced slight declines but is also poised for its seventh consecutive positive session and 12th positive week out of 13.
QQQ's slight decline may be short-lived as the overall positive momentum and the possibility of a dovish Fed could lead to further gains.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) showed a mixed performance but is on track for its seventh consecutive positive session and 12th positive week out of 13.
Despite mixed performance on the day of the report, the positive trend in previous sessions and the potential for rate cuts could support continued gains for SPY.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) saw a 0.4% decline after Treasury yields rose following the December PCE report.
The rise in Treasury yields typically leads to a decrease in bond prices, which is reflected in the performance of bond ETFs like TLT. The reported uptick in yields directly impacts TLT's price.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80