The market expectation not long ago, supported by the Fed dot plot, was indicating that official rates were going to go down by 150 bps, almost non stop, to avert a recession. Now, after a strong unemployment report and a potential higher inflation report, the market is discounting just one 25 bps cut, if at all for all 2025. At the same time, the new Administration is mulling on $6Tn cut in spending, consistent with their plan to slow debt growth and support corporate America with lower taxes. I’m a nutshell, and on a net basis, these actions will negatively affect liquidity, which is a very important factor to support this market. Next Monday, after inauguration, we will know more details about what’s coming. In the meantime, the 4Q24 earnings season will start this week as well, with buybacks blackout period underway, which will likely put some pressure on stocks.
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