The Nov Core PCE Deflator was released today and came in at +0.06% MoM, well below Street consensus of +0.20%. The key takeaway is that inflation is falling like a rock. One can look at Core PCE MoM since the start of 2023 and the sustained downtrend in this reading is clear. October was the first month since March 2021 that the annual PCE price index was below 3%. This was a very good number for equities and bonds. It’s our opinion that the Fed will be forced to drop rates at least 3 times, if not more, in 2024. As interest rates drop, more of the cash sitting on the sidelines could be put to work in 2024, and we think it could be going into equities and bonds. The bond trade is looking very good to us, as The HCM-Pivot Point® turned up in treasuries in late October and has been marching forward ever since.

Generally, we expect equities to strengthen into year-end over the next 5 trading days. First, it is the start of the “Santa Claus” rally period from the last 5 days of the year into the first two days of the following year. With $240 billion pulled from equities in 2023 and now sitting in money market and short-term bonds, there is a lot of buying power, and positive momentum remains in place. So, we are constructive into year-end.