Your Capital Markets Snapshot: Markets Steady as Fed Rate Cut Expectations Rise

Last week, markets remained largely steady as investors awaited the upcoming Federal Reserve meeting, with the S&P 500 posting modest gains and remaining just below all-time highs. The probability of a 0.25% rate cut at the December meeting rose to over 95%, driven by contained inflation and a softer near-term economic outlook. The U.S. Treasury yield curve continued to steepen as short-term rates dropped sharply while longer-term yields rose, with the 10-year yield reaching 4.14% partially due to rising Japanese government bond yields and expectations for a more hawkish Bank of Japan. Labor market data was mixed: ADP reported the largest private payroll decline in over two years, but initial jobless claims dropped to a three-year low. Inflation data showed core PCE rising 2.8% year-over-year, slightly below expectations, while consumer sentiment improved modestly. Equity markets consolidated after a strong November, with the S&P 500 up 18% year-to-date and the Nasdaq up 23%. As we approach year-end, some potential markets will be closely watching this week’s Fed rate decision and the delayed November jobs report. Reviewing portfolios for potential rebalancing may be prudent as equity gains may have shifted expected allocations.