JEFF'S MARKET UPDATE
4th Quarter 2024 Market Commentary (as of 10/03/2024)
KEY POINT: The easing cycle has begun.
Just two weeks ago the Federal Reserve kicked off its much-anticipated easing cycle with a bold move. While many were anticipating a 25 basis point interest rate cut, the FED cut by 50 basis points. The move has left investors wondering about the rationale behind it.
Despite strong economic indicators, the Fed chose to go big in what they called a “recalibration” of rates. And while the markets reaction at first was negative over concerns is the economy slowing too much which is why the FED went big, markets within a day turned positive to the cut by the FED. It’s really not so much the first cut but a reaction to the anticipated future rate cuts coming down the road. It also didn’t hurt to hear Chairman Powell’s repeated reassurances that the economy is still strong and the jumbo cut is aimed to keep it that way.
As to the markets, we’ve seen stock and bond prices move well ahead of the first cut in rates. The markets have been expecting the economy to slow to a more modest pace and inflation to fall. And while that has been the case for inflation, the economy keeps chugging along. We are at the very beginning of interest rate cuts and while the timing of future cuts will be difficult to predict, the FED has not been shy about projecting more cuts down the road……thus the reason both the stock and bond markets are still reacting positively. These future cuts should also have a positive impact on the economy and the markets in 2025 as well as the global economy as we are seeing other major central banks around the world following suit.
So there is valid reason markets are near all time highs and maybe stretched a bit. With an election around the corner I think the markets will have a ceiling to them. Which will probably hold until we get past the election and we see more interest-rate cuts. That said, if we do see a pullback from existing levels, take advantage of it because it’s my opinion the future looks bright.
Wells Fargo Advisors did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
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