On Tuesday (December 26), the day after Christmas, currency markets were calm as markets in the UK, Australia, New Zealand and Hong Kong were still on public holidays. Many U.S. traders are also on vacation ahead of the New Year. #dailytoutiao#
The U.S. dollar was on track for its worst performance against a basket of currencies since 2020 as expectations of interest rate cuts from the Federal Reserve weakened the greenback's appeal relative to other currencies. At midday in the U.S. market, the major stock indexes are likely to end 2023 on a strong note. But after eight consecutive weeks of gains for the three major stock indexes, Wall Street has divided views on the future trend of U.S. stocks.
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Market Reaction:
Dollar
Many analysts expect the U.S. economy to slow significantly in 2024, but the Fed is also expected to take action to ensure that the gap between the federal funds rate and actual inflation does not widen too wide. If inflation falls much faster than the Fed's benchmark interest rate, monetary conditions could tighten more than Fed policymakers expect and increase the risk of a hard landing for the economy.
Data released last Friday showed that U.S. prices fell for the first time in more than 3-1/2 years in November, pushing the annual inflation rate further below 3% and boosting expectations for an interest rate cut in March next year.
Analysts at Wells Fargo said: "The Fed has made considerable progress on inflation, with core inflation approaching 5% at the beginning of the year, but the work of ensuring that inflation continues to move toward its 2% goal is not yet complete."
On Tuesday, the U.S. dollar index fell 0.13% to 101.57 on the day. The index has fallen back from its 20-year high of 114.78 on September 28, 2022, with an annual decline of approximately 1.84%.
The yen has stabilized near a recent five-month high as the Bank of Japan may soon end its ultra-easy policy. This policy has kept the yen under pressure throughout much of 2022 and 2023 as other major central banks embark on aggressive interest rate hike cycles. Bank of Japan Governor Ueo Wada said on Monday that the possibility of achieving the central bank's inflation target is "gradually rising" and that if the vision of sustainably achieving the 2% target increases "sufficiently", the central bank will consider changing policy.
stock market
U.S. stocks continued to rise at midday on Tuesday, with the Dow Jones Industrial Average rising more than 100 points.
The Dow Jones Industrial Average rose 0.34% and is now at 37515.25 points; the Nasdaq Index rose 0.42%; the S&P 500 Index rose 0.36% and is now at 4772.38 points.
Keith Lerner, co-chief investment officer at Truist, said Tuesday's moves could signal that positive market trends in recent weeks will continue to lift major stock indexes, despite weaker trading volume.
"Even though funding has been soft, there's still money flowing in as we head into the end of the year and there's strong bidding underneath the surface. That's likely to continue," he said.
U.S. stocks have performed strongly recently, driven by expectations that the Federal Reserve will cut interest rates next year.
“I don’t like that term, but if you were to describe what’s going on, it’s definitely the Goldilocks of the market,” said Jan Szilagyi, CEO and co-founder of Toggle AI. “Inflation is coming down, the economy is still going strong, interest rates are rising. The cycle is over. On all of these macro trends, the upside is justified."
As of last Friday, all three major U.S. stock indexes had posted gains for the eighth consecutive week. This is the first time the S&P 500 has posted eight consecutive weeks of gains since 2017, and the Dow Jones Industrial Average has posted eight consecutive weeks of gains since 2019.
So far this year, the Dow is up 12.79%, the S&P 500 is up 23.83%, and the Nasdaq is up 43.25%.
U.S. stock market forecasts diverge in 2024
Major Wall Street banks are divided on their forecasts for the stock market in 2024.
Some institutions predict that U.S. stocks will continue to rise strongly in the next one or two years. Goldman Sachs expects the S&P 500 to reach 5,100 points by the end of 2024. The investment bank's previous forecast was 4,700 points. Ed Yardeni, president of Yardeni Research, predicts that the S&P 500 could reach 6,000 points by the end of 2025, mainly due to the strengthening of the U.S. economy.
However, JPMorgan Chase believes that as global economic growth slows, household savings shrink and geopolitical risks remain high, the S&P 500 Index will fall to 4,200 points by the end of 2024. This is a very pessimistic view of the future of the U.S. economy while ignoring the current strength in business and consumer spending. JPMorgan Chase & Co. said the Federal Reserve would cut interest rates quickly if there was a severe economic downturn to avoid being accused of pushing the U.S. into an unnecessary and untimely recession.
Sharing a pessimistic stance with JPMorgan is BCA Research, which points out that as the recession begins, the S&P 500 index may experience its worst crash since 2008 next year.
Mark Spitznagel, one of the most pessimistic hedge fund managers on Wall Street and founder of the black swan fund Universa Investments, warned that the U.S. stock market crash is coming. He said that the United States is in the midst of "the largest credit bubble in human history." He also warned that this market crash will be even worse than that of 1929.
Mark Spitznagel said: "We are in the largest credit bubble in human history. It is all because of artificially low interest rates and liquidity, which has really changed a lot since the financial crisis. Credit bubbles are over, they will burst. Open, and there’s no way to stop it.”
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2023-12-27
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