Last Week’s Markets in Review: Fed Presidents Provide Interest Rate Outlooks

Global equity markets finished mixed for the week. In the U.S., the S&P 500 Index closed the week at a level of 4,415, representing an increase of 1.35%, while the Russell Midcap Index moved -0.80% last week. Meanwhile, the Russell 2000 Index, a measure of the Nation’s smallest publicly traded firms, returned -3.11% over the week. As developed international equity performance and emerging markets were mixed, returning -0.90% and 0.03%, respectively. Finally, the 10-year U.S. Treasury yield moved higher, closing the week at 4.65%.

With very little economic data released during the past week, investors’ attention was focused on the comments of numerous Federal Reserve Officials, including Chairman Powell. Market observers were intently interested in these comments as they tried to determine the Fed’s next interest rate decision and monetary policy’s future direction. Those who provided commentary included Lisa Cook, member of the Federal Reserve Board of Governors; Michael Barr, Vice Chair of the Federal Reserve; Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City; Christopher Waller, member of the Federal Reserve Board of Governors; John Williams, President of the Federal Reserve Bank of New York; Lorie Logan, President of the Federal Reserve Bank of Dallas; Philip Jefferson, Vice Chair of the Federal Reserve; Patrick Harker, President of the Federal Reserve Bank of Philadelphia; Raphael Bostic, President of the Federal Reserve Bank of Atlanta; Thomas Barkin, President of the Federal Reserve Bank of Richmond; Kathleen O’Neill Paese, President of the Federal Reserve Bank of St. Louis and most importantly Chairman Powell. Throughout the remainder of this update, we will provide our readers with the more important highlights from their commentary.

To start, Chairman Powell stated that the U.S. central bank will continue to move carefully but won’t hesitate to tighten policy further if appropriate, stating, “If it becomes appropriate to tighten policy further, we will not hesitate to do so. We will continue to move carefully, however, allowing us to address both the risk of being misled by a few good months of data and the risk of overtightening.”

Dallas Fed President Logan said she supported leaving the Fed’s policy rate on hold last week to assess if financial conditions are sufficiently tight to bring down inflation while pointing to recent signs the fight had not yet been won. Logan commented, “Inflation remains too High, and it looks like we are trending toward 3%” rather than the Fed’s 2% inflation goal.

Federal Reserve Bank of Philadelphia Bostic, one of the Fed’s more dovish members. said, “I think our policy is restrictive, and likely sufficiently restrictive, but I think we’re going to still have bumps along the way.” Finally, President Barkin added, “In aggregate, we are still not seeing the full effect of policy,” President Barkin added during a speech in New Orleans.

With the next FOMC meeting scheduled for December 13, we currently find it unlikely that the Fed will raise interest rates again at this meeting.

Best wishes for the week ahead – a week in which we will receive important updates on inflation and retail sales (remembering that consumer spending currently accounts for roughly 70% of economic growth in the U.S.).

All Comments by Federal Reserve Officials are sourced from Equity Market, Fixed Income returns, and rates are from Bloomberg as of 11/10/23. Economic Calendar Data from Econoday as of 11/10/23. International developed markets are measured by the MSCI EAFE Index, emerging markets are measured by the MSCI EM Index, and U.S. Large Caps are defined by the S&P 500 Index. Sector performance is measured using the GICS methodology.

Disclosures: Past performance does not guarantee future results. We have taken this information from sources that we believe to be reliable and accurate. Hennion and Walsh cannot guarantee the accuracy of said information and cannot be held liable. You cannot invest directly in an index. Diversification can help mitigate the risk and volatility in your portfolio but does not ensure a profit or guarantee against a loss.