The yearend 2023 outlook starts with a Federal Reserve on hold. The financial markets have witnessed a dramatic “pivot” in policy. The outlook for interest rates went from “higher for longer” to “high for a while” to an expectation of rate cuts in 2024. All this happened in less than a half year and since the Cumberland midyear outlook was published in the summer of 2023. So, we have now experienced a sequence of rapid and forceful rate hikes as the Covid exit occurred, to a multi-month “no change in rates” period, to the beginning of a sequence of rate cuts. The debate among market agents is now focused on how low rates will go, when, and at what pace.

The changes since mid-year 2023 include a Fed on hold while inflation is receding but still above the Fed’s targeted 2%. The American economy is slowing but not in recession. The US stock market has exhibited a strong rally that has spread more widely. Earnings of most companies have exceeded earlier expectations, and those expectations are being revised upward for 2024. More and more estimates are placing the S&P 500 above 5000 by yearend 2024, with an estimated annualized earnings rate close to $250. The stock market strength is broadening from the “FANG” or “Magnificent 7” or other metaphorical metrics to the entire market, and small caps are exhibiting strength, as are most sectors.

Continued at link below:

https://www.cumber.com/market-commentary/q4-2023-cio-overview-outlook