Latest / Markets with Megan: A Quick Financial Markets Update / Soaring Holiday Sales and Fed's Possible Rate Cut | Episode 194 | 12-17-24

Transcript

Soaring Holiday Sales and Fed's Possible Rate Cut | Episode 194 | 12-17-24 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Well, the holiday cheer definitely has shoppers this year, and that's according to the November retail sales report that we got.
• 0:07
  Megan Horneman: Today.
• 0:07
  Megan Horneman: It's Tuesday, december 17th, and we just wanted to discuss a little bit about the economic data we got this morning and then what we see for the Federal Reserve meeting tomorrow.
• 0:17
  Megan Horneman: This will be the last meeting of 2024, and it's highly anticipated that they will cut interest rates.
• 0:23
  Megan Horneman: But first let's talk about retail sales.
• 0:25
  Megan Horneman: At the headline level, retail sales came in a bit better than expected and they've been increasing now for the past three consecutive months.
• 0:34
  Megan Horneman: Now that includes everything from gas to autos, to food, to building materials.
• 0:40
  Megan Horneman: So we like to strip out a lot of those volatile items to get what's considered a control group, a true core number, and that true core number actually rose 0.4%, which was in line with expectations, and that was after declining last month.
• 0:54
  Megan Horneman: So November hasn't slowed the consumer down whatsoever.
• 0:58
  Megan Horneman: It's showing that there is strong holiday shopping season coming into the month of December.
• 1:04
  Megan Horneman: Now let's break down some of the details there.
• 1:06
  Megan Horneman: Now, primarily, this was led by auto sales, and it's not surprising there at the end of the year you tend to see auto dealers try and discount some of the inventory so they can bring in the future year's inventory and also remember that interest rates did decline a bit so it brought some of those buyers back into the market.
• 1:24
  Megan Horneman: From the auto perspective and some of the other categories that were strong were sporting goods and then internet shopping, that was a big driver.
• 1:32
  Megan Horneman: If you look at a lot of the other categories whether it's clothing, department stores, general merchandise these were all negative for the month, but internet shopping jumped off almost 2% for just the month and is up 6.5% over the past year.
• 1:45
  Megan Horneman: Now, remember in November we had not only Black Friday shopping but also Cyber Monday, so there was a lot of discounts from the internet standpoint and obviously a lot of shopping going on too.
• 1:57
  Megan Horneman: So what does all this mean?
• 1:59
  Megan Horneman: The equity market is weak today.
• 2:02
  Megan Horneman: Sometimes, when we start to get really good news, it's not good news for the markets because it means that the Fed has less flexibility and we think the Fed will still cut interest rates by 25 basis points tomorrow.
• 2:14
  Megan Horneman: We think it's way too telegraphed.
• 2:16
  Megan Horneman: It's widely expected.
• 2:17
  Megan Horneman: We don't think the Fed's going to disappoint on that.
• 2:20
  Megan Horneman: However, we do think they've kind of painted themselves into a very difficult situation because what they've done with cutting 50 basis points and then cutting at every meeting since they started this easing cycle.
• 2:31
  Megan Horneman: It is starting to reignite some of the inflation pressures and what we're seeing today with these strong sales from a retail standpoint, it's not cooling the economy the way that I think that they had anticipated.
• 2:42
  Megan Horneman: So I think they'll come out with a more hawkish tone tomorrow.
• 2:46
  Megan Horneman: That means they'll come in telling investors don't think that we're going to continue with rate cuts into 2025.
• 2:52
  Megan Horneman: We're very data dependent.
• 2:54
  Megan Horneman: We think the outlook for 2025 is a lot less clear.
• 2:57
  Megan Horneman: We think they'll probably be on pause for at least the first quarter until they get some more confidence that this inflation uptick we've gotten recently is not sustainable.
• 3:07
  Megan Horneman: That's all that we have today.
• 3:09
  Megan Horneman: If you like this podcast, please subscribe, hit that alarm bell, share it with your friends or colleagues and then if you'd like a history of our podcast, you can always go to marketswithmegan.
• 3:18
  Megan Horneman: fm.
• 3:19
  Megan Horneman: We'll be back tomorrow to discuss the Fed meeting after we get the results.
• 3:23
  Megan Horneman: Thank you.