The S&P 500 on Friday marked its best weekly performance of 2024, snapping a two-week losing streak in the process. Wall Street’s bull run was rekindled after the Federal Reserve’s meeting on Wednesday. For the week, the S&P 500 advanced +2.3%, the Dow added +2.0%, and the Nasdaq climbed +2.9%.
Wall Street celebrated the most important aspect of the meeting – Fed members stuck with expectations for three quarter-point rate cuts this year, which identifies where each member sees short term rates at year end, along with the consensus view. Reports reflecting more economic resilience than expected, along with inflation data, led some to believe that the Fed would pull back on the number of rate reductions it envisioned for 2024, but that did not materialize to the relief of the market.
Question is – what can derail the markets?
Future Wealth’s View
Following a hotter than expected inflation number last week, the Fed meeting this week was a “Do or Die” moment for the markets. If there was any change to the dot plot from the three quarter point cuts from the past meeting, the markets would have seen a massive sell-off. But the markets surged upon hearing that there will be three interest cuts and all but ignored the commentary and the Q&A when the cautionary statements from the Fed Chair seem to suggest that their work was not done yet. The fact is that the FOMC’s policy rate remained unchanged at 5.25%-5.50% and Jay Powell warned that bumpy inflation may mean rates could be restrictive for longer and dialed back on the scope of cuts in 2025 and beyond.
There is a saying in behavioral science that – hearing is a part of the five senses and happens at most times, whether one is interested or not. In contrast, listening does not happen all the time but requires one to concentrate and engage the brain in deriving meaning from sound and words. Because listening takes introspection, most “listen” what they want to hear and ignore the deeper layers of the message.
The work by the Fed is not done yet and investors will be remiss if they don’t pay attention, i.e. listen to the real work that lies ahead in picking the right investments in their portfolio.