<\/p>\n\n\n\n
The S&P 500 hit a new record high, energized by the Fed’s aggressive move to cut the target range for the fed funds rate by 50 basis points to 4.75-5.00%. With this move, Fed Chair Jerome Powell is making the argument that sufficient progress has been made in getting inflation under control and now it is time to change course. Powell summarized this shift in policy in one meaningful line. \u201cThis recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we begin the process of moving forward to a more neutral stance,\u201d Powell said.<\/p>\n\n\n\n
With that, Powell told the market that inflation is no longer the priority, being replaced by extending the current economic expansion. In other words, Powell is all in on trying to make the \u201cno landing\u201d scenario for the economy a reality.<\/p>\n\n\n\n
A spate of rather weak Job Reports may have been what has forced Powell\u2019s hand to make a change in policy with inflation (as measured by the PCE) still above the Fed\u2019s target of 2.0%. The most recent PCE datapoints that the FOMC had in hand when they issued this last policy statement were July\u2019s figures which had PCE at 2.5% and core-PCE at 2.7%. Meanwhile, the three month average of total nonfarm payrolls sits at an anemic 116,000. This flies a bit in the face of Powell saying the \u201ceconomy is in solid shape,\u201d but the market took it in stride as the S&P 500 hit a new record high.<\/p>\n\n\n\n
The irony is not lost on us that the S&P 500 hit a new high during September, which is statistically the worst month for the market. In fact, this September was the first one in the last five years to have a positive gain. Of course, the fact that a recession looks unlikely together with the start of an interest rate cutting cycle is reason enough for investors to get a bit excited. Now the cherry on the cake is that November and December tend to have positive seasonality, and this is magnified in years where the US is having a Presidential election. Now we just must hold our breath to get through what is so far shaping up to be a volatile month of October marred by geopolitical concerns.
<\/p>\n\n\n\n
Date of report: October 7th 2024<\/sub><\/p>\n\n\n\n
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