December Economic/Market Update

Traditions Wealth Advisors
Greysen Golgert/Brien L. Smith CFP®
Economic Analyst Intern/Chief Investment Officer
12/17/2024

All eyes are on the Fed as a rate decision looms this month. Markets are pricing in an almost certain chance of a 25-bps cut to the Federal Funds Rate. This would reduce it to 4.25-4.50% from the current range of 4.50-4.75%. Most economists do not expect more cuts in 2025 because inflation remains stubbornly above the Federal Reserve’s target rate of 2% year-over-year and growth of the domestic economy has remained robust. The most widely regarded measure of inflation is the Consumer Price Index, which tracks the price changes of various goods every month. In November, headline CPI ticked up one basis point to 2.7% year-over-year and Core CPI for the year held firm at 3.3%. As a reminder, Core CPI excludes food and energy prices to give economists a better idea of the underlying stability of prices. Food and energy prices are extremely volatile and can often move in the opposite direction of prices from all other sectors. Individual sectors that stand out in the Bureau of Labor Statistics’ CPI report for November include energy, food, and vehicles. Price increases in food at home, or food you buy at the grocery store, outpaced the prices of food away from home. Food at home prices increased by 0.5% in November, led primarily by an 8.2% increase in the price of eggs and a 3.1% increase in the price of beef. Gasoline prices rose 0.6% in November, notably reversing a deflationary trend. Finally, the prices of new and used vehicles are up 0.6% and 2.0% respectively on the month. The most important outcome of the FOMC meeting on December 18 th is going to be the language that emerges in Jerome Powell’s remarks afterward. This will give an indication of the strategy that the Federal Reserve is going to implement moving forward. Most economists expect that his language will strongly indicate that the situation will be left as is following this cut.

Many opinions have been thrown out there about the effect that Trump policies will have on the domestic economy. As a message to naysayers and unabashed optimists alike, fiscal and foreign policy matter far less to the state of the economy than the actions of the Federal Reserve. Trump policies are likely to have some effect on growth in the United States, but Chief Global Market Strategist at Invesco Kristina Hooper notes that “we have to recognize that some Trump administration policies will likely act as countervailing forces to other Trump administration policies.” Businesses and individual investors alike are extremely optimistic about deregulation and the continuation of the Tax Cuts and Jobs Act (TCJA). Deregulation will favor financials and the crypto environment, and Hooper notes that the TCJA will likely benefit shareholders in Real Estate Investment Trusts (REITs). These policies will foment growth and domestic investment, but other Trump policies are likely to have a simultaneous negative effect. Protectionist trade policy, mass deportations, and a
closed border could result in labor shortages, price increases, and reduced economic activity as a result. Another point of consideration is that many of these policies could be implemented in different forms than markets expect them to be.

Plans continue to move forward for new kid on the block TXSE (Texas Stock Exchange) as it seeks a permanent home in Dallas, Texas. Starting this spring, the stock exchange will enter a temporary base of operations in the Knox-Henderson District of the city. Other attempts have been made in the past to unseat those two stock exchange heavyweights based in the northeast, but this time could certainly be different. The TXSE has the backing of securities companies Blackrock and Citadel, and the benefit of a thriving state and region. More than 1,500 publicly traded companies operate throughout the southeast, and the TXSE is focusing its efforts on wooing those companies away from the NYSE and NASDAQ. It will begin facilitating trades in 2025 and host listings in 2026. Only time will tell how successful this new competitor will be, but they are already making waves.

Merry Christmas and a Happy New Year to all reading. Enjoy the time spent with family and friends. Rest assured of the knowledge that Traditions Wealth Advisors is on top of the latest market movements and economic readings for your investment needs.

Sources:
https://www.bloomberg.com/news/articles/2024-12-10/texas-stock-exchange-to-open-temporary-home-in-dallas-next-year?
https://www.linkedin.com/pulse/four-trump-policies-most-likely-impact-economic-growth-hooper-lk1ce/
https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/notes-on-the-week-ahead/initial-conditions/
https://www.bls.gov/news.release/cpi.nr0.htm