Stronger economy means softer stocks for now
January 17, 2024 @ 17:44 +03:00
The US economy continues to surprise economists by beating retail sales forecasts for the sixth consecutive month. Reportedly, for December, the increase was 0.6%, compared to 0.3% in November and 0.4% expected. Sales excluding autos rose 0.4%, up from 0.2% a month earlier.
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The currency market reacted with outright dollar buying as a hot economy reduces the chances of monetary policy easing soon. The odds of a rate cut in March fell below 60% immediately after publication, although they exceeded 80% last week, according to the FedWatch Tool.
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The stock market, however, is in that part of the cycle where good news is bad news for stocks because of expectations of tighter monetary policy in the future. Such a phase typically doesn’t last long, but it has a high chance of remaining prevalent in the markets in the coming weeks, contributing to a correction in the year-end rally in stocks.