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Nasdaq Markets Outlook

Is the Fed Walking Back the Pivot?

A mostly graphical daily curated roundup of the markets and the economy from Nasdaq's IR team.

| "the Chairman’s Paul Volcker era is over. Easier money is on the way." -WSJ, The Editorial Board

“The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.” -Ludwig von Mises, Austrian School Economist

-Markets outpace central banks as rate cut bets fuel 'everything rally'-RTRS

-Fed pivot piles pressure on Europe’s central banks to shift stance -FT

| Walking back the pivot? | “We aren’t really talking about rate cuts right now,” Fed's Williams on CNBC

| BofA forecasts 152 global rate cuts in '24

| 1st year since 2020 cuts to outpace rate hikes

| markets merrily front-running >150bps of Fed cuts in '24

-BofA's Michael Harnett, The Flow Show

IR Insight chart
IR Insight chart

* source: BofA's, Michael Hartnett, The Flow Show

| "only 5 occasions past 90 years Fed cut rates when core CPI (now 4.0%) higher than unemployment rate (3.7%), cuts triggered by war (Oct'42) or recession (Oct'69, Aug'74, May'80, Jul'81); markets all-in on infallible Fed via cheap, leveraged, distressed assets."

-BofA's Michael Hartnett, The Flow Show

IR Insight chart
IR Insight chart

* source: BofA's, Michael Hartnett, The Flow Show

| "With concern over inflation and a hawkish Fed now in investors’ rear-view mirror, we could continue to see financial conditions ease and lift market P/Es further.

Every single one of the breadth rallies over the past 2 years has been due to P/E expansion on the back of some sort of “macro” relief (i.e., not EPS driven)."

-Piper Sandler's Michael Kantrowitz

IR Insight chart

* source: Piper Sandler's Michael Kantrowitz

| "We’ve written a LOT about this over the past two years **, and it seems as though we can mark 4Q as the start of the Fed Pivot trade for markets – once the market thinks the Fed is done, bonds and stocks BOTH rally, regardless if a recession is ahead or not.

-Piper Sandler's Michael Kantrowitz

| Fed pivot rally = market breadth improving

IR Insight chart
IR Insight chart

* source: Grindstone Intelligence

| 1970s saw a roller coaster ride | "pivot in 1975 far more interesting given pivot followed hard landing but also entrenched inflation in '70s world of war, oil shocks, fiscal excess, industrial unrest"

-BofA's Michael Hartnett, The Flow Show

IR Insight chart
IR Insight chart
IR Insight chart

* source: BofA, Michael Hartnett, The Flow Show


1) Equities + TYields MIXED / Oil + Gold LOWER + Dollar HIGHER

Today = “Triple-witch” (options/futures) expiration + final 2023 rebalancing of multiple indices, including S&P and Nasdaq. The week-long CRSP rebalance is going on as well. Expect large block trades across the market at the open and more so at the close today

DJ -0.2% S&P500 -0.2% Nasdaq +0.1% R2K +0.4% Cdn TSX -0.6%

Stoxx Europe 600 -0.2% APAC stocks HIGHER, 10YR TYield = 3.922%

Dollar HIGHER, Gold $2,033, WTI -0%, $71; Brent -0%, $76, Bitcoin $42,111

2) The Fed pivot rally...not based on EPS expansion but valuation expansion.

IR Insight chart

* source: Emmanuel Cau, Barclays

3) Earnings momentum positive in Europe...

IR Insight chart

* source: Emmanuel Cau, Barclays

4) Eurozone PMIs End 2023 On A Weak Note

IR Insight chart

* source: Piper Sandler


-US PCE + personal income + spending data will be key

-Inflation reports in the UK + Japan.
-BoJ decision on Tuesday

-Notable earnings include Nike and Micron.

IR Insight chart

* source: Barclays' Emmanuel Cau


BlackRock, TPG Deal With UAE Finds New Way to Juice ESG Returns BNN

-The United Arab Emirates has agreed to retain a smaller portion of the profits generated by a $30 billion venture involving BlackRock, TPG, and Brookfield Asset Management, in an effort to lure more private money into climate finance deals.

-In practice, the UAE’s decision to impose a ceiling on its own profits means outside investors stand to receive as much as 5 percentage points of additional returns.

UK watchdog urges ESG raters to adhere to new code ahead of possible rules YahooF

-"With its strong focus on international consistency, this industry-owned code will play a key role in increasing transparency and trust in the ESG data and ratings market," Sacha Sadan, FCA director of ESG, said in a statement on Thursday.


  • ECB is largely united on seeing rate cuts later than market bets-BBG
  • ECB’s Muller says market bets on first-half rate cuts premature-BBG
  • China’s policy combo gives investors hope for a market rally-BBG
  • China’s gloomy economic data paints ‘dire’ growth picture-BBG
  • Euro zone likely in recession, PMI surveys show-Y
  • Japan's factory activity extends declines as pressures persist-RTRS
  • Bundesbank sees shallow recovery in 2024 with inflation receding-BBG
  • UK consumer confidence rises to 3-month high-FT
  • Germany lifts spending freeze after budget deal clinched-RTRS
  • New Zealand’s recession is a warning for the rest of world-AFR
  • Pound jumps as Bank of England warns no interest rate cuts coming soon-TG
  • Yen's fair value seen around 140 to dollar amid narrowing rate gap-NIKKEI
  • China's Nov new home prices fall for fifth straight month-Y
  • Beijing and Shanghai cut down payments-SCMP
  • Once-Hot China REITs get slammed as property slump dents demand-BBG
  • US tells Israel to lower intensity of Gaza war ‘in near future’-FT
  • EU to extend trade truce with US until after presidential election-FT
  • Rishi Sunak clashes with Israeli ambassador over two-state solution-TG
  • EU fails to agree €50bn funding for Ukraine-FT
  • Hungary vetoes Ukraine aid after EU agrees on membership talks-BBG
  • Beijing rules Taiwan’s ban on Chinese goods is trade barrier-BBG
  • Biden administration to impose inflation penalties on dozens of drugs-RTRS
  • AI presents growing risk to financial markets, US regulator warns-FT
  • Morgan Stanley bankers hope CEO Ted Pick ends fines in brutal texting-NYP
  • Global payments considers acquisition of US peer Shift4-BBG
  • Apple to switch to OLED displays for iPads and MacBooks-NIKKEI
  • Vivendi to consider options for Telecom Italia stake-BBG
  • Elanco Animal Health CEO targeted by activist investor Ancora-
  • SpaceX gets US approval to test direct-to-cell calls via Starlink-BBG
  • Disney-Reliance India entertainment merger beset with antitrust-RTRS
  • OpenAI, Meta, Microsoft Chase Wearable AI-TI
  • St James’s Place plans to raise up to £1bn to buy out partner businesses-FT
  • Costco posts upbeat first-quarter results-RTRS
  • U.S. Homebuilder Lennar Beats Quarterly Revenue on Steady Demand-USN

Oil/Energy Headlines: 1) Maersk denies Houthi claim container ship hit by Yemeni militia -RTRS 2) Guyana and Venezuela agree to refrain from using force, but fail to resolve territorial dispute -AP 3) India will buy Venezuelan oil, says minister -RTRS4) US oil, gas rig count falls 10 to 681 on week, as basin activity hits a two-year low -Platts 5) Trans Mountain pipeline warns of 2-year delay over regulatory setback -RTRS 6) Iraq studies budget change to resume Kurdistan oil exports -BBG 7) US still needs fossil fuels, white house climate adviser says -BBG

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Massud Ghaussy, CFA

About the author

Massud Ghaussy, CFA, is part of Nasdaq's IR Insights team and delivers daily insights that empowers readers to get a sense of the important issues impacting the day's trading.