A lack of government data detailing employment and inflation metrics continued to be of concern in November, as markets relied more on private sector entities to replace absent government data.
The Federal Reserve announced a rate reduction of a quarter point on the Fed Funds Rate in late October, yet is casting doubt on further rate cuts this year. Concerns surrounding underlying inflation are focal to the Fed as well as a weakening jobs market with increasing layoffs across various industries.
The Fed’s decision to ease rates in September may be perceived as a method to alleviate a slowing economy, not entirely a response to diminishing inflation. Markets carefully follow Federal Reserve decisions as a signal of where the economy is expected to head. Labor market data and economic releases provided by the federal government, which the Federal Reserve and economists rely on, are coming under escalating scrutiny. There is an increasing reliance on labor market data compiled by private companies, not the government, as credibility with the Bureau of Labor Statistics has progressively deteriorated.
Weakening employment data prompted the Federal Reserve to suggest that a reduction in interest rates would be considered sooner rather than later. The Federal Reserve is becoming increasingly concerned about the health of the employment market, enticing it to possibly lower rates more proactively in order to curtail an economic pullback.
Markets reacted to uncertainty surrounding the effect of tariffs on corporate earnings and consumer sentiment, as economists and analysts have found it difficult to determine how much of an influence tariffs have had on profitability and consumers thus far.
Trade tensions continued as uncertainty surrounding the implementation of tariffs in early July drove volatility higher.
Some economists believe that the Fed’s reluctance to lower rates may jeopardize economic momentum as consumer expenditures continue to be sensitive to elevated interest rates.
Consumers helped buoy markets in April as shoppers rushed to spend on autos, sports equipment, and electronics in anticipation of rising prices brought about by tariffs.
Turmoil sweep throughout the global markets as the tariff announcements were broader and more significant than expected.
The administration confirmed that the U.S. would impose a 25% tariff on goods and services imported from Canada and Mexico effective early April, including an additional 10% tariff on Chinese imports.
Proposed tariffs by the administration led to elevated volatility and concern in the domestic and international markets.
Presidential campaigning and expectations about the Fed’s direction with rates enthralled the markets in 2024.
