Macro & Market Musings are weekly insights on Growth, Inflation, Policy and Looking Ahead from Annex Wealth Management’s Chief Economist, Brian Jacobsen. Brian, a frequent contributor on CNBC and Fox Business News, hosts regular updates on the economy and markets. Check our events page for Brian’s next live event.

Growth: Hopes and Fears

Consumer Confidence in December dropped, but sentiment has risen. Both measures of attitudes, the Consumer Confidence index and the Consumer Sentiment index, are up after the election, but why the sudden disconnect? They ask different questions. The confidence survey is more about business and labor market conditions. The sentiment survey is more about personal financial conditions. The difference highlights how consumers can be of two minds: things are getting better, but prices are still too high and jobs are getting harder to find. People can feel better (sentiment), but still not be fully confident in how things will play out..

Inflation: From Simmer To Sizzle?

The consumer price index was up 3.4% in 2023 and looks to be simmering down to around 2.8% for 2024. The temperature of inflation could increase a bit in early 2025. Services account as service inflation continues to moderate, but stay high. Services account for 65% of the consumer price index and while inflation for that category is falling, it’s still high at 4.6%. Goods account for 35% of the consumer price index and while that category has had deflation over the last year, it is beginning to turn up towards mild inflation. 

Policy: Wait And See

Whether the Fed’s “hawkish cut” where it cut rates, but signaled it might cut back on the pace of rate cuts in 2025 actually plays out will depend on lot on early 2025 data and policy actions from Congress and the President. The Summary of Economic Projections is a guess as to what might happen with the data. If history is a guide, those guesses will prove to be wrong. It’s probably best just to wait and see what happens rather than jump to too many conclusions about how things might shake out.

Looking ahead: Roll With It

The Santa Claus Rally–the historical tendency for stocks to make gains during the last five days of the year and the first two of the next–carries with it an interesting lesson. There are lots of theories about why it happens: portfolio repositioning, lower liquidity in the markets, trading dominated by individuals rather than institutions, a dearth of data releases, etc. But maybe it shows that the tendency for the market is to go up because the businesses people invest in are in the business of creating value for shareholders and the customers they serve. The noise from politics and data releases can often add to volatility instead of providing a lot of clarity.