A few things were contributing to Friday’s rebound in U.S. stocks, according to professional market-watchers.
The most obvious was the PCE data released earlier. It showed prices had risen less quickly than economists had expected last month.
Commentary from two senior Fed officials — Chicago Fed President Austan Goolsbee and New York Fed President John Williams — also helped reassure investors that the central bank would likely continue cutting interest rates in 2025, albeit at a slower pace.
Finally, data from the University of Michigan helped to further rebut investors’ fears about sticky inflation by showing that respondents’ expectations regarding the pace of inflation over the coming year had moderated.
“We’re seeing a bit of a restoration of faith that this market still has room to grow based on good fundamentals. GDP getting revised up, lower PCE, the good job market so far. All of those things have started to solidify traders’ understanding that this market is still in a pretty good spot,” Brian Mulberry, chief portfolio manager at Zacks Investment Management, said during an interview with MarketWatch.
Signs that Republicans in the House could manage to avert a government shutdown — even if only for a few weeks — also contributed to investors’ optimism, Mulberry said. Reports that Berkshire Hathaway had decided to deploy some of its cash pile into stocks also helped ease concerns about valuation multiples in a market widely considered to be expensive.
Still, many expected the recent volatility in markets to persist during the first quarter of next year.
“Remember, we are still in a technical bull market but volatility is normal after such powerful runs so use that volatility as your friend,” Todd Walsh, founder of Alpha Cubed Investments, said in an email.
