Dear readers,
Today, we witnessed a significant development in the financial markets that has the potential to shape the future of the economy. The Federal Reserve policymakers concluded their last meeting of the year, and the outcome was unexpected.
In their statement, the policymakers acknowledged the significant drop in inflation, a fact that couldn't be ignored. What caught investors by surprise was the projection that the Fed expects to cut rates by 0.75 percentage points next year. This news sent shockwaves through the market, resulting in a rally across various sectors.
Treasuries experienced a surge, with the 10-year Treasury yield dropping from 4.2% to 4.03% in a single day. This is a significant decrease compared to the 5% it briefly reached in October. Stocks also soared, with the Dow Jones Industrial Average reaching a new record of 37090, rising by 512 points or 1.4%. The S&P 500 and Nasdaq also rallied by 1.4%.
Prior to the meeting, economists expected the Fed to adopt a more cautious approach. However, the inflation report from the Labor Department and the separate report on wholesale prices provided a different perspective. These reports indicate that consumer prices remained cool in November. Some economists even calculated that core consumer prices, which exclude food and energy items, rose at a less-than 2% annual rate over the past six months.
While there are no guarantees that inflation will continue to remain low, the chances of the Fed bringing the economy in for a soft landing are looking increasingly better. This development has far-reaching implications for various sectors and investors.
On another note, let's take a look at the biotech sector. Despite the challenges it has faced recently, there are clear signs that the worst might be over. Layoffs have become a common occurrence, and over 100 biotech stocks are currently valued at less than their cash reserves. However, a recent rally has provided hope for long-term investors, leaving room for further gains.
These are just a few highlights from today's market events. The financial landscape is constantly evolving, and it's crucial to stay informed and adapt accordingly.
Wishing you a successful day in the markets!
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