5 Things You Need to Know to Start Your Day

Good morning. Markets are sent into raptures by the Fed, economists and investors rewrite their 2024 outlooks and focus turns to the ECB and [View in browser]( [Bloomberg]( Good morning. Markets are sent into raptures by the Fed, economists and investors rewrite their 2024 outlooks and focus turns to the ECB and BOE. Here’s what’s moving markets.  —[David Goodman]( Everything rally Global markets are caught up in a wild rally as the impact of yesterday’s Federal Reserve decision filters through to every corner of the financial world. The melt-up comes after the Fed gave its[clearest signal yet]( that rates have peaked, with Jerome Powell and his colleagues releasing forecasts showing that a series of cuts will come next year. As [Bloomberg reporters put it today](, traders are betting “the great monetary pivot is near as central bankers engineer a once-unthinkable soft landing in the world’s largest economy.’’ The[moves are startling](, Stocks are surging, with Europe’s Stoxx 600 index gains as much a 1.7% and S&P 500 futures rising 0.3% index ended within 2% of its record high on Wednesday. Meanwhile bonds around the world on are on a tear, with major European securities seeing double-digit drops. All that comes after what was the best Fed day across assets in almost 15 years, according to data compiled by Bloomberg. Goldman forecasts The Fed pivot saw markets and economists rush to rewrite their forecasts for next year. Investors are now pricing in six quarter-point cuts in 2024 by the Fed, double the three moves implied by the central bank’s forecasts. On Wall Street, [Goldman Sachs was one of the first out of the blocks](, saying they now anticipate a faster and steeper set of interest-rate cuts. “We now forecast three consecutive 25 basis-point cuts in March, May, and June to reset the policy rate” from a level that Fed officials will likely soon see as too high, the Goldman’s economics team, led by Jan Hatzius, wrote in a note. The bank then sees a quarterly pace of rate reductions, culminating in a target range of 3.25% to 3.5%. The current range is 5.25% to 5.5%. Gross vs Gundlach There’s still some [room for disagreement in markets though](, with some of the biggest names in the bond world at odds about just how far Treasuries can rally now. Jeffrey Gundlach at DoubleLine Capital says US 10-year yields will fall toward the low 3% range as the central bank is likely to slash its cash-rate target by a full two percentage points next year. Former Pimco bond king Bill Gross dismissed such euphoria, saying the yield is already about where it should be at just on 4%. All eyes on Europe The focus now switches to Europe, where both the European Central Bank and[Bank of England](are due to announce rates decisions today. Both are [confronting market outlooks that have been upended by the Fed]( —  traders now see at least six quarter-point reductions for the ECB and five for the BOE in 2024. Yet there are risks the wagers have gone too far — while both banks are expected to hold rates today, officials could push back against the rapid moves is rate-cut pricing. Norway shock In the midst of the dovish fever pulsing through global markets, Norway’s central bank reminded everyone [hawkish surprises are still possible](. The Norges Bank pushed ahead with a final hike in borrowing costs, partly acting to shore up the krone just as the US Federal Reserve leads a likely global pivot toward easing. The move, predicted by only a minority of economists in a Bloomberg survey, saw the currency surge and means that the central bank that effectively began a cycle of tightening among rich countries may now also become last to end it.  What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - The Markets Today team are keeping track of [all the day’s moves here](. - Six Millennium portfolio managers[leave hedge fund in London.]( - [Bloomberg’s Daybreak podcast]( delves into Biden’s pilling dilemma. - How traders [made a fortune]( switching off a nation’s gas supply. - [Range Rovers become thief-magnets](, causing prices to tumble. - [John Authers writes](that Powell has pivoted to a happy new year. - The Crown [returns to its original star]( in its final episodes. And finally, here's what Joe’s interested in this morning Yesterday was another great day for the soft landing believers. First, the PPI came in on the cool side. And more importantly, the components of PPI that plug into PCE -- the Fed's preferred inflation gauge -- imply a very cool reading ahead. In a note to clients, Citi estimated that the forthcoming core PCE reading will come in at just 0.46% for the month. So stocks rallied after that. Then at 2pm we got the Fed announcement, which indicated an expectation of 75 bps worth of rate cuts in 2024. Core PCE is forecasted to grow by 2.4% now next year vs. previous expectations of 2.6%. And then during the Powell press conference, it was basically dovish all the way through. He didn't express concern about easing financial conditions. And he didn't express concern about the economy possibly growing at "above trend" rates. (He also said there's no reason to believe we're in a recession right now). So that's yesterday. BTW. Here's a chart I made yesterday, which looks at how many gallons of gasoline you can buy in exchange for one share of SPY (the popular S&P 500 ETF). In the summer of 2022, it got down to 73. Today you can sell one share of SPY and get nearly 150 gallons of gasoline. That might prove helpful for consumer sentiment. Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Tell us what you want to see in the Five Things newsletter! Please [take our quick survey here.]( [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. 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