November's Rally Wipes Out Fed Tightening, Market Recap Reveals

The recent rally in the stock market has led to looser financial conditions in the U.S., erasing two months of Federal Reserve tightening. The drop in 10-year Treasury yields and surge in equity prices have reversed the tightening in conditions seen since September. This puts the Fed in a difficult spot ahead of its upcoming policy meeting, as it aims to keep credit restrictive until inflation is under control. The Fed is not expected to raise rates next week but may choose to keep rates high for longer, potentially delaying the first rate cut until September 2024.