Fed Chair Jerome Powell's basic message during his press conference yesterday was that the Fed is in no hurry to lower interest rates, but the Fed still intends to lower them over time. So it's a dovish pause. That boosted stock, gold, and bitcoin prices today.
Fed Chair Jerome Powell's basic message during his press conference yesterday was that the Fed is in no hurry to lower interest rates, but the Fed still intends to lower them over time. So it's a dovish pause. That boosted stock, gold, and bitcoin prices today.
Meanwhile, Investors Intelligence Bull/Bear Ratio remained relatively low this past week. It was released yesterday morning before Powell's presser (chart). That's bullish for stocks, too, from a contrarian perspective.
Almost all of 2024 data have been released. The US economy surpassed almost everyone's expectations for the past three years except our own. We're looking for a strong 2025 as well. That's all consistent with our technology-led, productivity-driven Roaring 2020s outlook.
Let's review today's data:
(1) GDP. Real GDP rose 2.3% (saar) during Q4 to a new record high. Our preferred measure of the core real GDP growth rate rose more, by 3.2%, also to a new record high (chart). It is real final sales to private domestic purchasers, which strips out inventory changes, trade, and government spending. It's also the Fed's preferred gauge of underlying growth. It was led higher by a whopping 4.2% jump in real consumer spending.
Inventory drawdowns reduced real GDP by 0.93 percentage points, making up the bulk of the difference between the headline and the core growth rates. This item tends to be volatile and will probably rebound in Q1. During the quarter, investment in wholesale inventories fell $26.9 billion and investment in retail auto inventories fell $6.6 billion (chart).
On the business investment front, high-tech capital spending continued to climb to another new high, led by R&D and software (chart). Capital spending on structures and equipment fell 1.1% and 7.8%.
(2) Unemployment. Initial jobless claims fell 16,000 to 207,000 (sa) last week, and continuing unemployment claims fell 42,000 (chart). Those decreases occurred despite increased claims in California, mostly due to the fires. Labor market strength persists thanks to strong economic growth and corporate earnings.
(3) Gold. Today, the price of gold rose 2.1% to a new record high of $2,851 an ounce (chart). A race to ship gold across borders ahead of potential tariffs has depleted the Bank of England's bullion stockpile, the FTreported. That extra dose of demand has helped gold break out of its trading range, so we wouldn't be surprised if it gives back some of those gains once the tariff panic settles. Then the climb should resume to $3,000.
(4) Bitcoin. Meanwhile, bitcoin is nearing a new all-time high. In his presser yesterday, Powell, in response to a question about risks from digital assets, said banks are "perfectly able to serve crypto customers as long as they understand and can manage the risks" and added that "a greater regulatory apparatus around crypto" from Congress would be "very constructive."
