“Ring them bells for the blind and the deaf
Ring them bells for all of us who are left
Ring them bells for the chosen few
Who will judge the many when the game is through"
- Bob Dylan, Ring Them Bells
The Powell Pivot
The bell heard following the Federal Reserve Open Market Committee’s (FOMC) meeting on November 2nd sounded a lot like a dinner bell for the bulls on Wall Street. The meeting’s minutes showed a slight deviation in language, with Committee members suggesting we are moving from a period that required “sufficiently restrictive” monetary policy to reduce inflation, to a period where the FOMC believes it can “proceed carefully on the totality of incoming information and its implications for the economic outlook.” A subtle, but effective change in messaging. The dovish outlook continued when the Committee released their “dot plot” (committee member’s forecast for future interest rates) by projecting three 0.25% interest rate cuts by the end of 2024. The slight change in language and small reduction in projected policy rates was all the market needed to surmise the Fed’s game of interest rate hikes was through.
The S&P 500 responded with a 9-week win streak, rising +16% over the final two months of the year. With an end to restrictive policy in sight, investors across asset classes responded with a broad and powerful rally to finish 2023.
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Michael J. Aroesty