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Principal Financial: The Crosroads of 2024 Principal Financial: The Crosroads of 2024

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New York Stock Exchange, Wall st, New York, USA

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Principal Financial Group conveyed on Tuesday their belief that 2024 is on the cusp of a pivotal turn. Anticipating a 150-basis-point rate cut by the Federal Reserve in the coming year, the financial market is being positioned for a seismic shift.

2023 pleasantly surprised the markets, defying a multitude of challenges and staving off the widely expected recession to conclude the year near historic highs. Peering into 2024, the market’s resurgence, coupled with the Federal Reserve’s halt on rate hikes, has laid the groundwork for an eagerly awaited pivot towards rate reductions, as stated in the financial institution’s investor note.

Underpinning an upbeat market sentiment is the potential for 2023 GDP to reach 2.6%, based on the Federal Reserve’s latest forecasts. Furthermore, headline inflation decelerated to 3.1% in November and unemployment currently stands only at 3.7%.

While the prospect of rates descending looms large, the upcoming Jan. 31 Fed meeting is not seen as the likely stage for this shift. Market dynamics indicate an overwhelming 87.1% likelihood that the central bank will leave rates unaltered. Alternatively, the prospect of a 25-basis-point cut is meager, with odds standing at just 12.9%.

Emphasizing the possibility of a mild recession, the financial institution additionally warned of the need for caution even as rate cuts increasingly appear on the horizon.

Moving to a separate arena, major indices and their corresponding mirrored ETFs traded with a mixed tone on Tuesday. The Nasdaq Composite (COMP.IND) (QQQ) descended by 1.2%, while the S&P 500 (SP500) (SPY), (IVV), (VOO) declined by 0.4%, and the Dow (DJI) (DIA) edged higher by 0.1%.

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