Investment Week at a Glance

Stocks finished mixed for the week. The Dow Jones Industrial Average rose 1.0%, the S&P 500 was down 0.6%, and the NASDAQ fell 1.6%. Foreign stocks (MSCI EAFE) were up for the week, rising 0.9%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.19%.  (Data source: Wall Street Journal)

Fed Cuts Rates By 0.25%

The Federal Reserve made its 3rd consecutive rate cut to end the year last week as expected. Markets moved slightly higher on the rate cut news and Fed Chair Powell’s commentary. There were 3 dissents, which was the most division since 2019, highlighting the disagreement among Fed members. Next year is unlikely to give us as many rate cuts as we saw this year; the market is pricing in 2 rate cuts for 2026. The Fed also announced it will begin buying $40 billion in Treasury bills each month until April to support liquidity, a start to quantitative easing (QE).

Small Caps on the Rise

Small-cap stocks have been performing well recently as the Russell 2000 is up nearly 7% the past month. The S&P 500 is up just over 1% over that same time period, as is the NASDAQ. Small caps have not performed as strongly as the S&P 500 in recent history. Over the past 5 years, the Russell 2000 has only gone up 29% in comparison to the S&P 500, which is up 84%. Lower interest rates typically help small-cap stocks as they can borrow money for less, so we will see if small caps begin to play catch-up to the larger companies.

Lululemon Stock Rises on Earnings & CEO Leaving

Lululemon stock rose on Friday by nearly 10% as earnings beat estimates and CEO Calvin McDonald announced he will be stepping down. The stock has had a rough go after being one of the bigger winners during Covid. The stock is down 46% over the past 5 years, but has rallied this month up nearly 25%. Investors are hopeful this change can turn around the stock and get it back to the growth it saw during Covid. (CNBC)

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Quiz

How many voting members are on the Federal Open Market Committee (FOMC) ? (Scroll Down for Answer)

1. 12
2. 14
3. 16
4. 18

Answer:

1. A) 12, FOMC has 19 members attend meetings but only 12 voting members. All 7 Board of Governors vote as well as the NY Fed President. The other 4 rotate through the 11 Reserve Bank presidents in one year terms.

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