Markets This Week, 12/18-12/22, 2023: The Roaring 20s, Again

Economy and Markets: The Week Ahead

With no Fed members’ speeches or market-moving earnings reports scheduled this week, the markets will concentrate on the many important economic reports coming out in the next several days. These reports will paint a clearer picture of the state of the consumers, one of the main driving forces of the U.S. and global economy.

These and other economic data points will help investors evaluate whether the long-awaited interest-rate cuts will be coming as soon as markets currently expect them, in March 2024, or whether they will have to be postponed because of the hotter-than-expected economy.  

Last week, the Federal Reserve’s dovish pivot sparked a rally that propelled the markets upward, with many stocks reaching new all-time highs. Last Wednesday, the Federal Open Markets Committee (FOMC) kept interest rates unchanged, in line with expectations. What came as a surprise was the Fed’s “Dot Plot,” a graphic reflection of the FOMC members’ policy stance, which showed that 17 of 19 Fed officials projected that the policy rate would be lower by the end of next year, with the median projection pointing to a total of 0.75% in rate cuts during 2024. While the end of the hiking cycle was as much as certain, the strength of the pivot to easing was a positive shock.

The bulls’ celebration was somewhat dampened on Friday, when the president of the New York Fed, John Williams, said that it was too soon to be talking about rate cuts. However, despite slight end-week declines, it was one of the strongest weekly rallies in the past decade, with all main indexes rising for the seventh consecutive week.

The S&P 500 (SPX) posted its longest winning streak in six years, coming within reach of its 2021 peak after rallying 2.4%. The Nasdaq-100 (NDX) surged 2.9% on the week, reaching a new all-time high. The Nasdaq Composite (NDAQ) jumped over 3% but still has a lot of ground to cover to get even near its peak of end-2021. The Dow Jones Industrial Average (DJIA) rose 2.8% on the week, also setting a record high. The seven-week bull ride has reminded many analysts of the “Roaring 20s,” the period of strong economic growth and stock-market rally of the 1920s.

The Fed’s newfound dovishness and the market’s strong upward reactions made many money managers, including the most bullish ones, update their next year’s outlooks a week or two after they were published, as the S&P 500 has already almost reached the level slated for end-2024. It also raises questions concerning how much more room to run further is left for the stocks, given the weak outlook for the fourth quarter’s earnings, and considering some contradictions in the market’s expectations. Thus, the markets are pricing in the Goldilocks economic scenario with lower, but still healthy growth, and declining inflation. However, this scenario wouldn’t warrant the three rate cuts of 0.25% expected by the markets and reflected in the Fed’s “Dot Plot.”

In this uncertain environment, investors are strongly advised to follow economic reports closely and to base their decisions on trustworthy data and analysis.

Upcoming Earnings and Dividend Announcements

The Q3 2023 reporting has ended, but some earnings reports are still scheduled this week.  

The most noteworthy earnings events this coming week are the reports of Nike (NKE), FedEx (FDX), Accenture (ACN), General Mills (GIS), Carnival (CCL), and Paychex (PAYX).

Companies’ reporting dates, consensus EPS forecasts, past data, analyst ratings, and price targets can be found on the TipRanks Earnings Calendar.

This week, Ex-Dividend dates are coming for the payouts of Amphenol (APH), PulteGroup (PHM), Broadcom (AVGO), Medtronic (MDT), Philip Morris (PM), Altria Group (MO), Omnicom Group (OMC), and other dividend-paying firms.

Companies’ Ex-Dividend and Dividend Payment dates, analyst ratings, and price targets can be found on the TipRanks Dividend Calendar.

Upcoming Economic Calendar Events

There are several important reports scheduled to be published in the next few days:

» Q3 2023 GDP Growth Annualized (third and final estimate) – Thursday, 12/21 – This report, released by the U.S. Bureau of Economic Analysis, will provide a final reading of the U.S. economy’s health in the previous quarter, incorporating fresh data received after the first and second estimates’ release. The third reading is expected to be unchanged from the second, which showed a 5.2% annualized rate of economic expansion.

» November’s Core Personal Consumption Expenditures (Core PCE) – Friday, 12/22 – This report, published by the U.S. Bureau of Economic Analysis, reflects the average amount of money consumers spend monthly, excluding seasonally volatile products such as food and energy. FOMC policymakers use the annual Core PCE Price Index as their primary gauge of inflation. Analysts expect the Core PCE to mimic the disinflation trend seen in the CPI report, slowing to 3.4% from October’s annual rate of 3.5%.

» December’s Michigan Consumer Sentiment Index – Friday, 12/22 – This report, published by the University of Michigan, portrays the results of a monthly survey of consumer confidence levels and consumers’ views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP. The index is expected to remain unchanged from November’s level of 69.4.

Current and scheduled economic reports, Fed statements, and other releases, as well as their level of impact on the stock markets, can be found on the TipRanks Economic Calendar.