On the heels of the Fed telegraphing they were going to cut rates several times in 2024, the price of gold went on a tear along with the mining stocks as the US dollar weakened. Here is what set off the large moves in major markets.

December 13 (King World News) – Peter Boockvar:  Well, if you took the over (was 2 that I set it at as that was what the September dot plot had) on the dot plot of those who would confirm the fed funds futures pricing in 4 rate cuts in 2024, you won. Now four estimate a fed funds rate of 4.25-4.5% next year and we even have one that thinks it could be as low as 3.75-4.0%. The group is coalescing around a 4.5-4.75% median fed funds rate in 2024 from 5.1% seen in September as 6 members are here. Five believe it will be 4.75-5%, one says one cut and two believe the fed funds rate will remain as is.

As there really was no change in GDP forecasts for 2024 as the estimate was 1.4% instead of 1.5% seen previously and the unemployment rate expectation was left unchanged at 2.4%, it was the core rate PCE median estimate of 2.4% from 2.6% in September that was the reason.

With the statement, after highlighting the strong GDP gain in Q3, “Recent indicators suggest that growth of economic activity has slowed.” They repeated that “job gains have moderated” and added “eased” when referring to inflation saying “Inflation has eased over the past year but remains elevated.” Everything else was pretty much identical to the September meeting.

Bottom line, we now have 17 of 19 dots that are expecting rate cuts in 2024 with only the degree being the difference. I’m guessing Michelle Bowman was one of the dots that expects no change and we wonder who the other one is, along with what Powell thinks. The funny thing with the fed funds futures market is while the Fed is moving closer to what they were pricing in prior to the statement and dots, they are now further pricing in more rate cuts. The December 2024 contract yield is down by .185 bps, so basically adding another cut to total almost 125 bps.

So now Powell has a moving target of fed rate cut expectations that are moving lower, even though today just confirmed what was already beginning to get priced in, and we’ll see if at the presser he tempers those expectations which I think he will try.

The 2 yr yield is down 13 bps post meeting and the 10 yr yield is lower by 8 bps. The $ is getting hit, gold is back above $2,000 and stocks continue to motor on with hopes of the rate cut utopia.

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