The market rally during the shortened holiday trading week of November 21st-25th should not be trusted just yet.
The Dow Jones Industrial Average rose 1.78% during the week, the S&P 500 increased by 1.53%, and the technology-heavy NASDAQ grew by 0.72%.
The move higher came for several reasons, but none materially changed the economy’s outlook over the coming six to twelve months.
Just the fact that the Fed is talking about reducing the amount of their rate increases is significant, and many economists applaud this move. Economists are happy with this because the Feds policy changes have a lag, meaning it takes time for rate increases to show in economic data reports.
The concern has been the Fed is raising rates too quickly, and by the time the lag sets in, the economy will be in the dumps. So, slowing the pace today is a possible way the Fed can avoid running the economy into the ground. Not running the economy into the ground is the “soft landing” we often hear about when people refer to the Fed and its current policies.
Another catalyst for the recent move higher was…
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