U.S. Indices saw considerable downside (SPX -2.95%, NDX -3.6%, DJIA -2.58%, RUT -4.4%) as did Treasuries, while the Dollar surged in the wake of a hawkish FOMC. Highlighting the extent of the moves, the S&P 500 noticed its largest post-Fed move since March 2020. Briefly recapping, the Fed cut rates by 25bps, as expected, but with hawkish dot plots, with the median showing only two cuts seen in 2025. Fed’s Hammack dissented, voting to keep rates unchanged. Guidance was also tweaked to signal a slower pace of easing ahead. In the Q&A, Chair Powell admitted the decision was a “closer call”, but the “right call”, which saw a further extension of the hawkish moves already seen. Sectors were all notably in the red with Consumer Discretionary plunging 4.75% and weighed on by Tesla (TSLA) (-8.5%) weakness. Global FX peers saw downside vs the Dollar, with the DXY at its highest since November 2022. On the central bank footing, attention turns to BoE and BoJ. The crude complex was firmer into settlement but sold thereafter on account of the aforementioned greenback strength. Bitcoin and Gold also saw significant selling with the former dropping to under USD 101k and spot gold under USD 2.6k. The Federal Reserve cut rates by 25bps, as expected, to 4.25-4.5% in an 11-1 split, with Hammack voting to leave rates unchanged. The statement was little changed from the November meeting, but added in considering the “extent and timing” of additional rate adjustments (prev. In considering additional adjustments), Fed will assess incoming data, evolving outlook and balance of risks, signalling a slowing of easing ahead. The further hawkish skew came in the updated Summary of Economic Projections (SEPs) whereby the median dot plot for 2025 and 2026 FFR forecasts were lifted above expectations. Recapping, the median 2025 dot rose to 3.9% from 3.4% (exp. 3.6%), while the 2026 median rose to 3.4% (exp. 3.1%, prev. 2.9%). 2027 and longer run median dot plots rose to 3.1% (prev. 2.9%) and 3.0% (prev. 2.9%), as expected. As such, the 2025 median dot plot looks for just two cuts in 2025. Elsewhere, Core PCE inflation is now seen at 2.5% for 2025 (exp. 2.3%, prev. 2.2%) and 2.2% for 2026 (exp. 2.0%, prev. 2.0%). Forecasts for the unemployment rate were largely as expected, with all horizons, ex-longer run, seen at 4.3%, although 2027 was expected. In addition, and as was alluded to in the latest Minutes, the Fed lowered the repo rate by 30bps to 4.25% (lower end of FFR target, vs 5bps above lower end previously). In Chair Powell’s pre-prepared remarks he stated the Fed is squarely focused on two goals, and that the economy is strong, the labour market remains solid, and inflation is much closer to the 2% goal. Ahead of November PCE on Friday, Powell said total PCE probably rose 2.5% in the 12 months ending in November, while core PCE prices probably rose 2.8% in November. The Chair added that the policy stance is now significantly less restrictive, and going forward they can be more cautious, something which was indicated from the updated SEPs and statement tweak. In the Q&A, the distinct hawkish remark came from the first question, which accentuated hawkish market moves, as Powell said that today’s decision was a “closer call”, but the “right call”, suggesting there was a discussion surrounding holding rates at this meeting. Powell added risks are two-sided, and trying to steer between those two risks. On the statement change, Powell stated that “extent and timing language” shows the Fed is at or near the point of slowing rate cuts, and the slower pace of cuts reflects expectation. Powell said that cuts they make in 2025 will be in response to data and as long as the labour market and economy are solid, they can be cautious as they consider further cuts. In addition, looking to US President-elect Trump’s term, Powell said some people did take a very preliminary step and incorporated conditional effects of coming policies in their projections. Note, one committee member sees no cuts in 2025, and one sees five 25bps rate cuts – showing a wide range of views on the Fed, but many were centred around the median. Continuing to look ahead, Powell said it will be looking for further progress in inflation to make those cuts, and added that from here is a new phase, and the Fed is going to be cautious about further cuts.
To mark my 3100th issue of TraderNoble Daily Commentary I am offering a special 2-Year rate of Euro 2750 for my Platinum Service which includes 1 monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it lost 500 points yesterday and is now down by 72 points for December after closing November with a gain of 3049 points having finished October with a gain of 2179 points. September saw a gain of 4402 points following a 301-point loss for August after closing July with a gain of 1918 points while June closed with a gain of 2074 points, having made 1843 points in May. The Platinum Service made 4010 points in April after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, following a small gain of 285 points gain in July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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