Friends
The Fed Chair turned into the Grinch that is trying to steal the bulls’ Christmas. Though, as expected, the Fed lowered the Fed Funds rate a quarter of a point to 4.25% to 4.50%, the takeaway from today’s Fed statement and subsequent Fed Chair press conference was that given inflation’s stickiness, market participants better adjust their expectations with regards to any future rate cuts. The mirky view is indicating the likelihood of only 2 more rate cuts next year instead of the previously expected 4 rate cuts. But today’s market reaction indicates that market participants are doubtful that we will see any additional rate cuts as we move through 2025. Listen, just like many pundits were wrong about this year, I wouldn’t put too much stock into what they are now saying about next year. But the bond market sold off on today’s developments (rates moved higher) and the stock market took a beating.
I have been saying for some time now that though the condition for stocks has been good, that valuations were high. Valuation, as we have said, is not a timing mechanism, but guess what pundits were pointing to after the market tanked this afternoon. You guessed it- valuation. The Fed’s somewhat hawkish stance was today’s match, and valuation is the bucket of fuel that the market is sitting in.
So, we had ourselves a hefty selloff today. Will it snowball into something more heinous in coming days? We will see. As for today, by the close the Dow Jones Industrial Average was down 1,123 points to finish the day at 42,326. The S&P 500 was down 178 points to close at 5,872. The Nasdaq Composite Index was down 716 points to close at 19,392. Gold was down $57 to trade at $2,604 per ounce, while oil was up $.02 to trade at $70.10 per barrel WTI.
We had all been pretty much lulled to sleep by the markets in recent weeks. Well, we are awake now and I’m guessing we will see much more volatility into year end. I hope Santa is revving up his sleigh to deliver us a rally to help stem today’s tide. Maybe we all need to start singing Santa Claus is Coming to Town like at the end of the movie Elf.
Have a nice evening everyone.
Jim
