Our latest views on data, trends and events influencing the markets.

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The Federal Reserve is widely expected to cut rates at the end of its December 17-18 meeting. Investors will be curious to hear about the pace of future cuts and the Fed’s intentions for 2025. Small business optimism jumped to its highest level since June 2021, bringing 34 months of subpar readings to a close. The consumer price index ticked higher but remained in-line with expectations. The European Central Bank cut rates by 25 basis points and dropped hawkish language from its guidance statement. China’s government announced intentions to stimulate the country’s economy further.

This week we’ll be looking at the Empire State manufacturing survey and the S&P flash US services and manufacturing PMIs on Monday; US retail sales, capacity utilization and the home builder confidence index on Tuesday; building permits, housing starts, and the FOMC interest-rate decision together with Fed Chair Powell’s press conference on Wednesday; third quarter GDP (second revision), initial jobless claims, the Philadelphia Fed manufacturing survey, existing home sales, and US leading economic indicators on Thursday; and the PCE index and consumer sentiment on Friday. Our strategists and portfolio managers cover the latest geopolitical, market and economic trends in our Insights section.

What

December 16, 2024

Weekly

October 2022

Additional resources

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Inflation dashboard

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Election Watch 2024

Our fixed-income taxable multi-sector portfolios are underweight investment grade corporates, high yield, commercial mortgage-backed securities (CMBS), US Treasuries and agencies. We are overweight MBS, and emerging markets. Tax exempt munis are attractive for investors in the top tax brackets in non-qualified accounts, despite currently rich ratios to Treasuries. We are modestly short duration and remain positioned for a longer-term steepening of the yield curve.

Fixed income

Domestically, we continue to prefer dividend-paying stocks and are slightly underweight rate-sensitive large growth stocks. We’re overweight small-cap stocks and large-cap value. Outside the US, we’re overweight and constructive on emerging markets.

A UK business group lowered its growth forecast for the country owing to measures in the new government’s budget. Germany’s government collapsed in early November due to dissensions within its very shaky coalition government. A new election is set for February 23. At the beginning of December, France’s prime minister resigned after a no-confidence vote. South Korea’s president briefly imposed martial law in early December, a move that was swiftly rejected by the country’s parliament. In November, oil prices fell and gold’s steady ascent to new all-time highs was disrupted, with the precious metal declining from a prior-month peak.

Retailers prepared for the holiday shopping season, where consumers are expected to spend $1 trillion, a quarter of it online. The housing market remained sluggish as mortgage rates inched higher, with 30-year loans rising over the month to 6.81%. President-elect Trump made headlines with the announcement of 25% tariffs on goods from Canada and Mexico and an additional 10% on those from China. The Federal Open Market Committee meets next in mid-December.

Economies

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December

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Job Openings and Labor Turnover

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Emerging Markets

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Consumer Price Index

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Federal Open Market Committee

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Global Financial Crisis

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Eastern Daylight Time

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Mortgage-Backed Securities

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Standard and Poor's

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Institute of Supply Management

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United States

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Emerging Markets

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Personal Consumption Expenditures

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Automatic Data Processing

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Mortgage-backed Securities

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Bank of England

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European Central Bank

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Purchasing Managers Index

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Emerging Markets

US economy

International economy

US Equity

Positioning

London’s FTSE rose, while the Euro Stoxx 50, the MSCI All Country World ex-USA Index and the Nikkei closed out November lower. The Shanghai Composite rose slightly on the month.

US stocks rallied sharply in early November, resuming the uptrend in mid-month following a brief selloff. The S&P 500 closed the month at fresh highs above 6,000. Within the S&P 500, Consumer Discretionary, Financials and Industrials outperformed the most, while Health Care, Materials and Information Technology underperformed the most.

International Equity

After weeks of election-related yield volatility and a 25 basis-point rate cut by the Federal Reserve, rates fell sharply during the last days of November, creating a positive month for the Bloomberg US Aggregate Bond Index and a total return YTD of 2.93%. In the wake of the US election, investor concerns around sticky or growing inflation have risen and markets reduced easing expectations to only three 25 basis point interest rate cuts in the upcoming calendar year.

Positioning

Liquidity

Equities

Economies

Liquidity

Fixed Income

Equities

Economies

December 2024

Monthly

While money market yields are compelling, maintain a bias to lengthen duration where there is value. Take a balanced approach to credit given tight spreads and strong fundamentals. Use mortgage-backed securities where possible to capitalize on available carry and prepare for potential benefit of future spread compression.

Relative to longer-term fixed income, the 0-3-year part of the yield curve is attractive. These themes are guiding our investment views in the space:

Positioning

It is still too early to truly assess the ramifications on the liquidity markets of Trump’s return to the White House. However, we continue to think many of his potential policies, especially on tariffs and immigration, could be inflationary. Those primarily impact the money markets through the Fed, which should be factored into its updated Summary of Economic Projections released after its meeting on Dec. 18. In fact, that document is probably more important than the Committee’s decision to lower or maintain the target range—at present a coinflip—as we expect policymakers to adopt an every-other-meeting cut approach in 2025. A pause in December likely means a cut in January; a cut likely means a pause. If policymakers slow the pace of easing due to concerns about inflation stalling or trending back up, money markets likely will see yields stabilize at elevated levels.

Equities

Fixed Income

Liquidity

Economies

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Chief Information Officer

Economies

Liquidity

Fixed Income

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Standard & Poor's

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Federal Open Market Committee

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Producer Price Index

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second quarter

US fixed income

International

The Global Bond Aggregate Index gained 0.34%, and as measured by the Bloomberg US Dollar Index, the USD advanced 1.28% during the reporting period. Emerging market bonds continued to lead global bond total returns YTD +/- 8%. Despite the prospects of higher US growth and the potential for inflation to remain elevated, most developed central banks continued to lower key interest rates. The Bank of England reduced its policy rate by -0.25% to 4.75%, and the European Central Bank is slated to reduce its benchmark rate by at least an additional -0.25% in December.

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Organization of the Petroleum Exporting Countries

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Federal Open Market Committee

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Federal Open Market Committee

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European Central Bank

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International Monetary Fund

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European Central Bank

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Mortgage-Backed Securities

Positioning

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Union Bank of Switzerland

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Investment Grade

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Capital Expenditures

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Emerging Markets

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Morgan Stanley Capital International

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Personal Consumption Expenditures

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High Yield

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Commercial Mortgage-Backed Securities

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Artificial Intelligence

Read our Fixed Income committees’ current views and positioning >

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December

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United Auto Workers

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Overweight

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Probability Risk and Impact System

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Johnson & Johnson

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National Association of Home Builders

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National Federation of Independent Business

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Organization for Economic Cooperation and Development

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Earnings Per Share

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Bank of England

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Bank of Japan

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Standard & Poor's

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Standard & Poor's

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Europe, Australasia, and the Far East

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Gross Domestic Product

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fourth quarter

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Bank of Japan

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Purchasing Managers Index

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Quarter on Quarter

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Producer Price Index

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Consumer Price Index

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Kansas City

What will the Fed say?

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Institute of Supply Management

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Job Openings and Labor Turnover Survey

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United Kingdom

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United States

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Consumer Price Index

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Artificial Intelligence

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Consumer Price Index

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Environmental Impact Assessment

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Bank of England

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Mortgage Bankers Association

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Financial Times Stock Exchange

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United States Dollar

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Gross Domestic Product

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Fear of missing out

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Federal Open Market Committee

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Job Openings and Labor Turnover Survey

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National Federation of Independent Business

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Thousand

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Personal Consumption Expenditures

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Institute of Supply Management

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Mortgage-Backed Securities

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National Federation of Independent Business

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Leading Economic Index

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Federal Reserve

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Financial Times Stock Exchange

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United States

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United States

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Gross Domestic Product

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Purchasing Managers Index

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Institute of Supply Management

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Standard and Poor's

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Republican Party

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Standard and Poor's

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Standard and Poor's

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Automatic Data Processing, Inc.

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Year to Date