Fed, Jobs, and Stocks: The Trifecta Shaping Year-End Gains
Chart: NVDA 1-year daily
The HCM-BuyLine® is positive, and the trend is up as investors are piling into stocks. We are positive on equities into year-end, and we expect a December rally to push the S&P 500 to 6,300. The recent run-up has been very satisfying, but as we all know, pullbacks are inevitable so let’s not be surprised when they occur. I do expect the market to march higher, but the odds are high that in the first quarter of 2025 we will see some consolidation, which should be expected.
The job market rebounded nicely in November from the weather and strike related distortions, a tad better than expected. Payrolls expanded by 227,000, slightly above the consensus of 214,000 and close to our forecast of 222,000. Additionally, the prior two months were revised up by 56,000, in line with our estimate of 50,000. The average workweek recovered to 34.3 hours from a downwardly-revised 34.2. Looking through the temporary distortions, the trend in payrolls growth and hours has clearly slowed.
Average hourly earnings rose 0.4%, bringing the y/y change to 4.0%, above expectations of 0.3% and 3.9%, respectively. The household survey was a little weaker with the unemployment rate ticking up to 4.2%, matching the consensus, but was just .004 points away from printing 4.3%. All-in-all, this report should keep the Fed on its rate normalization path in December, but also supports a slower pace of rate reductions in 2025.
We expect the Federal Reserve to remain dovish – that is, to remain in a cutting cycle. We would actually view a slower pace of cuts as a positive, as it means a longer cutting cycle. This would lengthen the time the Fed is dovish and therefore leave the “Fed put” in play for a longer period of time.
Chart: AAPL 1-year daily
Apple is breaking out, which is a great sign of strength as it is a major component of just about every index. Also look at Nvidia, which looks to be building up steam to break out.
