📈 Apple's all-time high

What’s going on here?

The Federal Reserve (the Fed) kept rates where they are, but forecasts of speedier-than-expected rate cuts sent investors’ tongues wagging.

What does this mean?

The federal funds rate dictates how much banks charge each other when they borrow money. And that, in turn, decides the interest rates they use to charge customers. So in other words, it’s the Fed’s main weapon against inflation. At the last meeting on Wednesday, the central bank unanimously decided to keep that essential rate where it is, buying it time to see how the current level affects inflation and the economy in the weeks to come. But that pause may not last long: the Fed’s now anticipating three cuts in the next year. That’s because US inflation is calming down while unemployment holds steady, giving the central bank room to pull down the rates that are stifling the economy.

Why should I care?

For markets: The best day ever (almost).

That prospect of rate cuts has investors pricking their ears up. Businesses can borrow money for less when rates are manageable, meaning they can invest more into operations and maximize profit. Plus, low rates decrease the discount rate used to value stocks, making them look more attractive in the present day. So with investors practically rubbing their hands together, it’s no wonder Bloomberg reported that Wednesday hosted the biggest asset rally on a Fed announcement day for nearly 15 years.

The bigger picture: Hard luck, Europe.

Lower rates make it cheaper for both businesses and everyday folk to spend money, which means more much-needed cash flooding the US economy. And while that doesn’t rule out a recession, it does make one a lot less likely. But it’s not an easy decision to make: central banks need to be sure that inflation has calmed before loosening up. That’s why, wary of prices’ tenacity, the Bank of England and European Central Bank both left rates untouched on Thursday.

What’s going on here?

Apple’s stock broke its own record on Wednesday to end the year on a high.

What does this mean?

Characteristically cool and steely Apple broke a sweat in the summer, when China’s flustered recovery snuffed out iPhone sales in a usually reliable market. But what a difference a couple of months makes. Well, and shrinking costs, robust sales from services like Apple Music and iCloud, and some investor optimism on the back of rate-cut rumors. Apple’s shares reached a new record high of $197.96 on Wednesday, meaning they’ve been pulled up 52% this year alone. So with a market value of over $3 trillion, Apple’s worth almost as much as Europe’s biggest stock market, France, as well as the individual economies of Italy, Canada, Australia, and Brazil.

Why should I care?

For markets: Little fish, the pond is yours.

Apple’s worth around $1 trillion more than at the start of the year. That’s an awesome feat, especially when you consider that only five US companies are valued above a single trillion: Microsoft, Alphabet, Amazon, and Nvidia. After all, it’s big, profitable tech companies that have attracted investors this year, since their heft makes them more resilient against high rates, inflation, and economic slowdowns. But thanks to forecasts of a kinder 2024, a whole host of neglected stocks have been earning their way back into portfolios, paving the way for broader rallies in the new year.

The bigger picture: Quality never goes out of style.

Apple wasn’t exactly cheap when Tim Cook took charge back in 2011. But since then, the stock’s risen seventeen-fold. The company’s investors must have read the Charlie Munger book of wisdom, then. Buffett’s late right-hand man advocated for buying outstanding companies at reasonable prices – not decent ones for cheap. Case in point: Apple makes up more than half of Berkshire Hathaway’s portfolio, and the sizable deposit has paid off handsomely.