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Mosaic Asset Partners - The Federal Reserve Makes A Pivot

December 15, 2023

The Federal Reserve just might have performed the “pivot” we have been waiting for. At the conclusion of their year-end meeting on Wednesday, the FOMC (Federal Open Market Committee) kept interest rates steady for the third straight time and even set the table for multiple cuts in 2024. Of course the timing of those cuts next year is being widely debated, but it seems clear the Fed believes they have done enough to keep inflation on the path to moving lower. The statements made by the Fed to “stay put” on rates had been anticipated but the policy easing comments were a bit surprising and helped the markets to rally further this week. “Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news,” Chair Jerome Powell said during a news conference.

Economic data released this week showed both consumer and wholesale prices were little changed in November. By some measures, though, the Fed is nearing its 2% inflation target. Bank of America’s calculations indicate that the Fed’s preferred inflation gauge, the PCE (Personal Consumption Expenditures) will be around 3.1% year over year in November, and actually could hit a 2% six-month annualized rate, meeting the central bank’s goal. In additional comments by Chairman Powell, he stated: “Recent indicators suggest that growth in economic activity has slowed substantially from the outsized pace seen in the third quarter. Even so, GDP is on track to expand around 2.5% for the year as a whole.” As always, the FOMC made it clear that the door will stay open if additional hikes are needed in the event inflation flares up again, but the pivot to an easing policy stance in the future is viewed as a big positive.

It goes without saying that while the waters are calming here, the world is still under an immense amount of pressure on many fronts. Don’t forget we are also about to engage in a full-on media frenzy as the primaries and presidential election season moves into high gear. With the year quickly winding down we are engaged in some of our own year-end planning and tax-loss harvesting. The capital gains are trickling in from our mutual fund holdings and we are making the adjustments needed to keep things on track. At this point, if we continue to see a market rally into year end, I would not be surprised if we saw some pullback in early January. Things feel a little “extended” right now so it would not be unusual for this to occur. Like you, I am feeling a bit better about things right now, but as always we stand ready to make our own “pivot” as needed.

Enjoy your weekend and any holiday festivities you might have going on!

https://www.cnbc.com/2023/12/12/cpi-inflation-report-november-2023.html?__source=sharebar|email&par=sharebar

https://www.cnbc.com/2023/12/13/fed-interest-rate-decision-december-2023.html

https://www.cnbc.com/2023/12/13/fed-meeting-today-live-updates-on-december-fed-rate-decision.html

Christopher E. Wasson, CFP®

President

 Mosaic Asset Partners, LLC

1122 Kenilworth Drive, Suite 310

Towson, MD  21204

410.821.0089         fax 410.821.5993

MosaicAssetPartners.com  

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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.