In summary
- A series of positive developments
- Fed’s cautious cut
- The week ahead
- Betting on the Fed
A series of positive developments
Last week delivered a series of positive developments for investors, propelling stock market indices to fresh record highs. First, upbeat signals from US-China trade talks in Madrid ignited global optimism, easing fears of renewed tariff escalations. Second, the US Federal Reserve (Fed) delivered a widely anticipated 25 basis points rate cut, framing it as a ‘risk-management’ move to support a cooling jobs market. Finally, tech giants powered ahead with standout performances, including Alphabet joining the US$3 trillion valuation club, Tesla surging on Elon Musk’s US$1 billion share purchase, and Intel soaring after Nvidia’s US$5 billion investment, underscoring broad market strength amid renewed Fed easing. US equities continued their impressive climb, with the S&P 500 gaining +1.22% over the week, and the Magnificent 7 soaring +3.57%.
Fed’s cautious cut
The Federal Open Market Committee (FOMC) lowered the federal funds rate by 25 basis points to 4.00-4.25%, marking the first cut of the year and bringing the total easing since September 2024 to 125 basis points. Chair Powell emphasised a ‘meeting-by-meeting’ approach, highlighting lingering inflation concerns while noting rising risks to the labour market, which he described as no longer ‘solid.’ The updated ‘dot plot’ showed a subtle dovish shift, with median projections for 2025 rate cuts increasing from 50 to 75 basis points, and longer-term forecasts for 2026 and 2027 dipping to 3.4% and 3.1%, respectively. Despite upward revisions to growth and inflation outlooks, the decision saw only one dissent from new Governor Stephen Miran, who advocated for a 50 basis points cut. Markets reacted with volatility but closed largely flat on the day, before resuming their upward trajectory.
The week ahead
After last week’s eventful developments, this week is expected to be quieter. Attention turns to global flash Purchasing Managers’ Index (PMIs) released tomorrow, which could provide insights into economic stability across major economies, though they are unlikely to drive major market movements. A series of Fed speakers throughout the week will offer their perspectives on last week’s complex FOMC meeting, where dot plot projections showed notable dispersion. The data highlight arrives on Friday with the US core Personal Consumption Expenditures (PCE) deflator, expected to print softer than previously feared, based on recent inflation inputs.
Betting on the Fed
The Fed’s dovish stance has ignited a broad-based market rally, with investors betting on faster rate cuts to bolster the US economy while shrugging off geopolitical tensions. Historically, equities have performed well when the Fed eases into a soft landing, as seen in non-recessionary cycles like the 1980s. However, this enthusiasm carries risks, as markets may be getting ahead of the Fed’s actual policy path, potentially leading to volatility if expectations outpace reality. Such optimism continues to support investor confidence in tech’s resilience, but it also highlights the need for caution amid persistent inflation and labour market weakness.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/resources/insights/weekly-market-commentary
Weekly Market Commentary
In summary
A series of positive developments
Last week delivered a series of positive developments for investors, propelling stock market indices to fresh record highs. First, upbeat signals from US-China trade talks in Madrid ignited global optimism, easing fears of renewed tariff escalations. Second, the US Federal Reserve (Fed) delivered a widely anticipated 25 basis points rate cut, framing it as a ‘risk-management’ move to support a cooling jobs market. Finally, tech giants powered ahead with standout performances, including Alphabet joining the US$3 trillion valuation club, Tesla surging on Elon Musk’s US$1 billion share purchase, and Intel soaring after Nvidia’s US$5 billion investment, underscoring broad market strength amid renewed Fed easing. US equities continued their impressive climb, with the S&P 500 gaining +1.22% over the week, and the Magnificent 7 soaring +3.57%.
Fed’s cautious cut
The Federal Open Market Committee (FOMC) lowered the federal funds rate by 25 basis points to 4.00-4.25%, marking the first cut of the year and bringing the total easing since September 2024 to 125 basis points. Chair Powell emphasised a ‘meeting-by-meeting’ approach, highlighting lingering inflation concerns while noting rising risks to the labour market, which he described as no longer ‘solid.’ The updated ‘dot plot’ showed a subtle dovish shift, with median projections for 2025 rate cuts increasing from 50 to 75 basis points, and longer-term forecasts for 2026 and 2027 dipping to 3.4% and 3.1%, respectively. Despite upward revisions to growth and inflation outlooks, the decision saw only one dissent from new Governor Stephen Miran, who advocated for a 50 basis points cut. Markets reacted with volatility but closed largely flat on the day, before resuming their upward trajectory.
The week ahead
After last week’s eventful developments, this week is expected to be quieter. Attention turns to global flash Purchasing Managers’ Index (PMIs) released tomorrow, which could provide insights into economic stability across major economies, though they are unlikely to drive major market movements. A series of Fed speakers throughout the week will offer their perspectives on last week’s complex FOMC meeting, where dot plot projections showed notable dispersion. The data highlight arrives on Friday with the US core Personal Consumption Expenditures (PCE) deflator, expected to print softer than previously feared, based on recent inflation inputs.
Betting on the Fed
The Fed’s dovish stance has ignited a broad-based market rally, with investors betting on faster rate cuts to bolster the US economy while shrugging off geopolitical tensions. Historically, equities have performed well when the Fed eases into a soft landing, as seen in non-recessionary cycles like the 1980s. However, this enthusiasm carries risks, as markets may be getting ahead of the Fed’s actual policy path, potentially leading to volatility if expectations outpace reality. Such optimism continues to support investor confidence in tech’s resilience, but it also highlights the need for caution amid persistent inflation and labour market weakness.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/resources/insights/weekly-market-commentary
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