Next week’s Federal Reserve policy meeting, the last of 2024, will set the tone for markets entering the end of the year and reveal investors’ expectations for 2025. Wall Street is certain it knows what will happen at the end of the central bank’s meeting on December 17-18. Federal funds futures pricing shows a 97% chance that the Fed will lower its benchmark lending rate by a quarter of a percentage point, from the current 4.50% to 4.75% to a target range of 4.25% to 4.50%. But the meeting will also bring a summary of the Fed’s quarterly economic forecasts, or “dot plot,” showing how policymakers see inflation and the job market in the year ahead and the prospects for further interest rate cuts. The market has digested dovish expectations and is expected to cut interest rates three to four more times, which means that the federal funds rate may eventually fall to between 3.50% and 4.0%. If these predictions hold true, it could add further upside to a year-end stock market rally that has faltered this week. .SPX YTD Mountain Standard 500 Index “If that’s the case, you might see interest rates come down, the dollar fall, tech stocks go higher,” said Joe Tigay, portfolio manager at Rational Equity Armor. “The Fed has a responsibility to normalize interest rates,” Tigay continued. “I think they’re going to stick with that decision for the time being.” The Dow Jones Industrial Average and the S&P 500 ended their year-end gains this week and were down 1.6% and 0.6%, respectively, as of Thursday’s close. The tech-heavy Nasdaq is the only major benchmark to post gains this week, albeit with a modest gain of 0.2%. The stubbornly defiant Fed’s preferred inflation gauge will also be released next week, after the Fed’s meeting on Friday. Economists surveyed by FactSet expect the personal consumption expenditures price index to fall on a monthly basis in November, from 0.24% to 0.17%, but to rise slightly on an annual basis, from 2.3% to 2.5%. Excluding volatile food and energy prices, core personal consumption expenditures are expected to rise 0.22%, down from 0.27% in October; the annual rate is expected to rise 2.9%, compared with 2.8% in October. If the PCE report confirms recent sticky inflation trends, that could put a damper on what many already consider a pricey market. Investors worry that inflation could return to be a concern next year if President-elect Trump follows through on his campaign promises of mass deportations and steep tariffs on imported goods. Some investors say the risk of inflation means it’s time to get defensive. David Kelly of JPMorgan Chase said he recommends investors should allocate a 50-30-20 portfolio, which is 50% stocks, 30% bonds and 20% alternative investments, to benefit from diversified returns. To be sure, investors are taking recent reports showing rising prices in stride, confident they won’t undermine the overall strength of the macroeconomy. “I still think we’re still in a bull market,” Tigai said. “Even if there is inflation, as long as our economy is growing, that doesn’t change for me.” Major companies will also report financial results next week. Micron Technology will report earnings on Wednesday, Nike, FedEx and Darden Restaurants will report earnings on Thursday. One week ahead calendar all times are Eastern Time. Monday, December 16 8:30 AM Empire State Index (December) 9:45 AM PMI Preliminary Composite Data (December) 9:45 AM PMI Preliminary Manufacturing Data (December) 9:45 AM PMI Preliminary Services Sector Data (December) Tuesday, December 17, 8:30 a.m. Retail Sales (November) 8:30 a.m. Capacity Utilization (November) 9:15 a.m. Industrial Production (November) 9:15 a.m. Manufacturing Production (November) November) 10 a.m. Business Inventories (October) 10 a.m. NAHB Housing Market Index (December) Earnings: Amentum Holdings Wednesday, Dec. 18 8:30 a.m. Preliminary Building Permits (November) 8:30 a.m. Current Account (Q3) 8:30 AM Housing Starts (November) 2 PM FOMC Meeting 2 PM Fed Funds Target Earnings Cap: Micron Technologies, Lennar, General Mills Thursday, December 19 8:30 AM Continuing Jobless Claims (12/07) 8:30 AM GDP Final Prices Last Month (Q3) 8:30 AM GDP Final Data (Q3) 8:30 AM Initial Jobless Claims (12) /14) 8:30 AM Philadelphia Fed Index (December) 10 a.m. Existing Home Sales (November) 10 a.m. Leading Indicators (November) 11 a.m. Kansas City Fed Manufacturing Index (December) Gains: Nike, FedEx, ConAgra Brands, Darden Restaurants, CarMax Friday, Dec. 20 8:30 AM Core PCE Deflator (November) 8:30 AM PCE Deflator (November) 8:30 AM Personal Consumption Expenditures (November) ) 8:30 a.m. Personal Income (November) 10 a.m. Michigan Emotion Finals (December)
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