Futures point to the post-election rally continuing when US equity markets open later this morning. While the final tally for the House has yet to be determined, the results thus far point to a red sweep in Washington. After jumping yesterday back to levels last seen in early July, ahead of the Fed’s latest monetary policy decision, the 10-year Treasury yield is inching up further this morning. While the Fed is widely expected to deliver a 25-basis point rate cut today, following the October Services PMI report, which brought with it a very different perspective than the one found in the October Employment Report, and the outcome of Tuesday’s election, the market is going to hang on Fed Chair Powell’s words about the path for further rate cuts. The disastrous data collection issue riddled October Employment Report cleared the way for the Fed to dial back monetary policy further. Despite this, the underlying strength of the economy and potential Trump economic policies are raising another round of questions about how many rate cuts the Fed could deliver in the coming months. Recent market expectations tallied by the called for as many as five 25-basis point rate cuts exiting the Fed’s June 2025 meeting. That figure now stands somewhere between three and four such cuts. Currently, that same tool shows the Fed delivering another cut in December, but in analyzing the shifting probabilities it’s worth noting the odds of no December cut have been climbing. The same tool shows the market expects the Fed to take a rate cut pause in January. Our thinking is these expectations are very much in flux but across the Fed’s last two policy meetings this year and all 8 next year, the market sees the Fed delivering just four rate cuts. That puts the Fed funds rate between 375-400 basis points, and suggests the Fed will need to lift its 2025 Fed funds targets when its updated December set of . The same is likely true for its GDP forecasts for this year and next as well. Where we’re going with this is even though the Fed will likely deliver a rate cut today, if we were betting people we would be laying some money down on Powell’s presser comments not being as dovish as they were in August and September. Yes, he’ll reiterate the Fed being data-dependent and making decisions meeting by meeting but the underlying data increasingly suggests the Fed will take a measured path to get monetary policy back to a more neutral stance. That likelihood could be akin to throwing some cold water on the market’s face following yesterday’s post-election pop. While we wait for the Fed’s policy announcement and Powell’s press conference, we have another sea of quarterly earnings this morning. Results last night from Qualcomm () were very supportive of our Digital Infrastructure model and what we learn this morning from Canada Goose () and Tapestry () should bring some color to our Luxury Buying Boom model. We can say the same for our Guilty Pleasure model as we drink in (we know you saw what we did there) quarterly results from Molson Coors () and Hershey (). After today’s market close, earnings from AMN Healthcare (), Axon (), Blink Charging (), Capri Holdings (), Cloudflare (), Fortinet (), Green Dot (), Motorola Solutions (), and Trade Desk () should deliver some insightful data points for our Aging of the Population, Safety & Security, EV Transition, Luxury Buying Boom, Cybersecurity, Digital Payments, and Digital Lifestyle models. More By This Author:Election Day Today, Then The Fed – How We See ItBig Tech Digestion, Prepping For The October Employment Report Bring On Big Tech Earnings
Will The Fed Kill The Trump Trade?
