Market Call: Refreshing Pause For Bulls & Reindeer

The federal funds rate futures market is anticipating two 25bps cuts in the federal funds rate over the next 12 months (chart). That makes sense to us and is consistent with the September FOMC's Summary of Economic Projections. More rate cuts could occur if a recession is coming our way in 2024, but that's not our forecast. We still think that the 10-year Treasury bond yield peaked at 5.00% on October 19. It was down to 4.44% on Friday. It could test resistance at last year's high of 4.25% on October 24, 2022.

We remain bullish on the S&P 500, which we expect will consolidate its impressive gains since October 27 for a few more days before resuming the Santa Claus rally through yearend. We are still forecasting 4600 by the end of the year. A solid break above 4550 could signal a very good start for stocks in 2024 (chart).