Forefront Market Notes: December 23rd

Stocks were under pressure last week as the Fed Chair’s hawkish comments unsettled investors ahead of the holiday season.

The Dow Jones Industrial Average received the hardest hit, falling 2.25 percent. The Standard & Poor’s 500 Index lost 1.98 percent, while the Nasdaq Composite Index dropped 1.78 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, retreated an eye-catching 3.38 percent.^1,2

No Santa Yet

Divergence marked the start of the week as megacap tech stocks rallied while the Dow Industrials fell for the eighth-straight session—its longest losing streak since 2018.³

Following its scheduled December meeting, the Fed announced it was cutting short-term rates by a quarter point, as widely expected. However, Fed Chair Jerome Powell also signaled fewer rate reductions next year. “From here, it’s a new phase and we’re going to be cautious about further cuts,” he said in his post-meeting news conference.

The rate news surprised investors, who were anticipating more dovish comments from the Fed Chair.^4,5

Markets were under pressure again early Friday as the spending bill to fund the federal government appeared to stall. But a lower-than-expected inflation update boosted the market and helped erase some of the earlier losses.^6,7

^{Source: YCharts.com, December 21, 2024. Weekly performance is measured from Monday, December 16, to Friday, December 20. TR = total return for the index, which includes any dividends as well as any other cash distributions during the period. Treasury note yield is expressed in basis points.}

 

Holiday Cheer

Despite a difficult week, stocks are on track to have their second consecutive year of double-digit returns. Year to date, through Friday’s close, the S&P 500 was ahead by about 24 percent. In 2023, the S&P 500 also tacked on 24 percent for the full year.⁸

What is the Lifetime Learning Credit?

The Lifetime Learning Credit (LLC) is a tax credit for qualified tuition and related expenses. It can help pay for undergraduate or graduate studies and courses to acquire or improve job skills. The credit is worth up to $2,000 per tax return. 

Another thing about this tax credit is that it’s available for unlimited tax years, unlike the American opportunity tax credit which is only for the first four years at an eligible institution.

To claim the LLC, you must pay qualified education expenses for higher education and enroll at an eligible educational institution. Check out the IRS guidelines for more details and to see whether you may qualify. 

*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS⁹

Footnotes and Sources