Markets Enter the New Year on a Roll

January 2, 2024

Markets Enter the New Year on a Roll Photo

The final two months of 2023 were marked by a historic rebound in financial markets fueled by an unexpected shift in the outlook for monetary policy. The “higher for longer” narrative from the Federal Reserve (Fed) quickly transitioned to policymakers welcoming the idea of multiple rate cuts this year.

The bond market — teetering on the edge of a third consecutive calendar year of negative total returns — closed 2023 with the biggest two-month rally in decades.1 The dire economic outlooks so common at this point last year have given way to expectations for an economic soft landing with inflation rapidly returning to the Fed’s 2% target.

This week’s economic releases will provide 2024’s first test for the more optimistic projections of the economy and markets.2 The economic data is highlighted by new jobs data, including the Job Openings and Labor Turnover Survey (JOLTS) out Wednesday and the December employment report out Friday. The December Fed meeting minutes out Wednesday afternoon will also be closely scrutinized to better understand the Fed’s “dovish” pivot.

1Reuters – Biggest two-month rally in decades rescues beaten-up bond markets; 12/29/23
2MarketWatch – U.S. Economic Calendar; as of 1/2/24

Tags: Markets | Federal Reserve | rate hikes | Economic data | Inflation | JOLTS

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