The Federal Reserve wrapped up its latest Open Market Committee meeting on Wednesday and, as expected, held the federal funds rate steady at 5.25%-5.50%. This was the third pause following the July hike, which was the 11th increase in less than 18 months. The hikes so far have been working to reduce inflation. The latest CPI reading was 4% down from a staggering 9.1% in July of 2022. Though Chairman Powell did not rule out an additional hike, looking ahead to 2024 the Federal Reserve is preparing investors for as many as three rate cuts. This is always subject to change, but the market loved the news and the holiday rally continues.
A fairly strong earnings season coupled with solid economic data on the labor market could justify the upward trend in the equity market. The risk of recession continues to dissipate, as projections for GPD (gross domestic product) in the US expand. Geo-Political risks will continue to be our primary headwinds near term, so we are committed to an investment strategy balanced with fixed income and alternatives to stocks. I’ve attached research comments regarding a Fed Pivot, helping outline the interest rate path this coming year.
Our entire team at Katahdin wish you and your family a holiday season that is full of warmth and cheer!