NEWS
The Fed Finally Delivers…So What Gives?

The much-awaited Fed decision led to its normal dose of volatility, as stocks initially reacted higher but ended up closing in the red. Several other central banks are announcing their decisions in the days ahead as global investors look to judge growth prospects through year-end and into 2025. 👀

Today's issue covers the Fed’s 50 bp cut and updated forecast, Amazon adding perks for its warehouse workers, and 23andMe’s management mass exodus. 📰

Here’s the S&P 500 heatmap. 1 of 11 sectors closed green, with energy (+0.19%) leading and technology (-0.91%) lagging.

And here are the closing prices: 

Most bullish/bearish symbols on Stocktwits at the close: 📈 $VEEA, $NVVE, $OMEX, $APLT, $SPRC 📉 $SCS, $WTI, $MULN, $NWL, $MDAI*

*If you’re a business and want to access this data via our API, email us.

POLICY
Market Reads Into The Fed’s Forecast 🕵️

If you were living under a metaphorical or literal rock lately, today was the most consequential “Fed Day” in quite some time, so let’s review what happened and how the market reacted. 👇

First, off consensus expectations were for the Fed to cut 25 basis points (bps), though a minority of the market expected 50 bps because they viewed the move as needed to make up for not cutting at its July meeting.

And as usual, the masses were on the wrong side of the bet (myself included), as the Fed announced a 50 bp cut by an 11-1 vote. Notably, most Fed members were on the same page, but Fed Governor Miki Bowman dissented in favor of a smaller cut…the first dissent by a governor since 2005. 🗳️

Here’s a red-lined version from the WSJ’s Nick Timiraos, showing that the Federal Open Market Committee (FOMC) feels that inflation is moving sustainably toward 2% and that the risks to its employment and inflation goals are ‘roughly in balance.’ ⚖️

The Fed’s updated economic projections also provided some color on its latest move and forecast. Essentially, the new dot plot shows the Fed finally catching up to the expectations that the market has been pricing in since the July meeting.

The Fed funds rate saw the largest adjustment, coming down to 4.40% at the end of the year and 3.40% in 2025. That would mean 50 bps more in cuts before the end of the year and a full percentage point more in 2025. ✂️

Inflation expectations came down, while their economic growth forecast was notched down marginally in 2024 but flat through 2027. Unemployment expectations also rose, but not by a lot…showing that the Fed is continuing to bet on a “soft landing” in the economy.

Jerome Powell’s press conference leaned heavily into the “soft landing” narrative, with Nick Timiraos highlighting some of the key takeaways below. 🎙️

As for the market’s reaction, stocks initially soared alongside gold, bonds, etc., before reversing during Powell’s press conference. Some analysts are concerned that a 50 bp cut is a bad signal for the economy (and the market). 😬

Many circulated a chart similar to @allstarcharts’ below, which shows the S&P 500’s performance after the initial rate cuts. As it shows, 25-bp cuts are generally positive, while performance after an initial 50-bp cut is often challenged.

With the Fed’s move out of the way, eyes turn to the Bank of England and Bank of Japan which are both announcing their latest moves tomorrow. But what’s clear is the world has shifted from higher rates and hikes to lower rates and cuts as inflation fades and countries look to support growth. 🔻

Traders and investors will be watching how the market settles over the coming days as the debate over whether to view this as a ‘successful soft landing’ or an ‘early warning signal’ rages on… 🤷

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