Chart of the Week
Equity markets are higher following the U.S. presidential election. Interest rates are also up. It seems the bond market is trying to digest the impact of the potential policy changes.
In the last six interest rate cutting cycles, yields were usually down or flat following the first interest rate cut. This may mean that there is a ‘higher resting heartbeat’ for inflation in the economy.
As of September, the market expected the Fed Funds rate to move all the way to 2.8% (from its peak at 5.5%). Yet, in the last two months, the market now expects fewer interest rate cuts by next November. Futures pricing now have the Fed funds rate at 3.9%.
What We’re Reading
2024 US Election: Focus on the Forest, Not the Trees – KKR
Evaluating the Impact of the Tax Cuts and Jobs Act Sunset + Future Tax Planning – Kitces
IRS Increases 401(k) Limit to $23,500 for 2025, IRA Limit Stays $7,000 – Plan Sponsor
Podcast of the Week
Post Fed Meeting & Election Outlook – Macro Markets, Guggenheim
Last Week
The Federal Reserve Open Market Committee lowered interest rates by 0.25%, as expected. Citing “further inflation progress” and easing labor market conditions, the statement noted that inflation is moving sustainably toward the 2% target. The October Consumer Price Index (CPI) report came in line with expectations, with headline CPI at 2.6%.
The Week Ahead
Earnings season will begin to wrap up next week. Companies in the S&P 500 are surprising analysts on the upside by 5% for earnings and 1% for sales. On the economic side, retail sales and industrial production will be key inputs. In the weeks ahead, we expect consumer sentiment may shift more on the positive side as we are past the event risk of the election.
Thank you for reading.
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