Trending
As you’ve probably seen the Fed delivered a 50-basis point rate cut yesterday and its updated set of economic projections suggest another 50-basis points in cuts are likely before the end of the year. Another 100-basis points are on the table for 2025, but as Fed Chair Powell reiterated during yesterday’s presser, the Fed will continue to react based on incoming data for the economy, inflation and jobs. Even through the market got most of what it was expecting, the post decision action in the market was mixed with the S&P 500, Nasdaq Composite, and the Dow finishing in the red.
Call it a delayed reaction to the Fed’s effort to extend the current economic cycle or the dollar but equity futures point to a rip, roaring market open with the Nasdaq and small cap ladden Russell 2000 set to blast off. With the August Existing Homes Sales data out later this morning the only economic data point until Monday’s September Flash PMI data, there is little in the way of economic data to question the Fed decision or its potential road map. Tomorrow, September 20, is a triple witching event and those tend to produce far greater volatility in the market than usual.
While some are quietly whispering “don’t fight the Fed”, others will be keeping a close eye technical levels for the S&P 500 and the Nasdaq Composite. Neither are overbought but both are well above key support levels, which means finding bargains in the market won’t be easy. This could lead to some “hold your nose” buying in the market in the near-term but following the almost 10% climb in the S&P 500 since early August we can’t rule out traders taking profits should the market punch its way higher.
Keep in mind, while the Fed has started its rate cutting cycle, geopolitical tensions persist, a US government shutdown is possible, and recent polling data suggest the 2024 presidential election somehow remains a tight race. In other words, uncertainties remain at time when the market is once again flashing “Greed.” Not exactly the best combination for rational thinking.