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The market saw a surge in enthusiasm following a stellar GDP report, propelling the benchmark S&P 500 (SP500) to a fifth consecutive record. Simultaneously, the Dow Jones Industrial Average (DJI) hit a new all-time high. Although the Nasdaq (COMP.IND) also experienced gains, the tech sector’s after-hours sentiment was dampened by Intel’s weak guidance, causing futures linked to the index to plummet by 0.6%. As it stands, S&P 500 and Dow futures are also down 0.3% and 0.2%, respectively.
Quote: “People are getting ahead,” commented Treasury Secretary Janet Yellen during remarks at the Economic Club of Chicago. “Instead of contracting, the economy has continued to grow. They’re seeing their fortunes improve, and I believe that if inflation stays low, they’ll begin to regain their confidence in the economy. It’s a good thing, reflective of strong, healthy spending and productivity improvements, and most likely not creating an inflationary challenge.”
Regarding inflation, the core personal consumption expenditures price index, the Fed’s preferred inflation metric, is set to be released on Friday at 8:30 AM ET. The index is anticipated to have risen 0.2% in December from November, signifying a 3.0% year-on-year increase. This continued progress is a positive for the central bank, which is gradually nearing its 2% objective despite concerns about potential last-mile obstacles. Incoming data will play a crucial role in shaping monetary policy, suggesting a promising economic outlook.
Know your onions: Ed Yardeni, founder of Yardeni Research, envisions a “Roaring 2020s” scenario as the base case, drawing parallels between the Spanish flu pandemic and COVID-19, while projecting that the S&P 500 will reach 5,400 in 2024. Yardeni stated, “Our basic premise is that a chronic shortage of labor is forcing companies to use technological innovations to enhance their productivity growth, which began to improve last year, according to the government’s quarterly data. As a result, inflation remains subdued, while real GDP growth, real wage growth, and profit margins all get boosted. The Fed is likely to ease but won’t have to cut the federal funds rate by much. Stock investors stand to benefit significantly.”
