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Market Overview

After yesterday’s interest rate cut and a volatile session that offset a potential surge, the equities market today is moving toward new record highs. The revised labor market data showing weakness prompted the Fed to cut rates by 25 bps, despite ongoing inflation risks.
 

Federal Reserve Outlook

The Fed appears set on a controlled, steady path of 25 bps cuts, aiming to balance inflation management with the pressures of a weakening labor market. The forward curve currently reflects a dovish trajectory through 2027.
 

Macro Drivers

• Growth & Inflation: Growth persists while inflation expectations remain elevated, especially after the rate cut. This environment supports commodity upside alongside equities.
• Yield Curve & Credit Spreads: A supportive yield curve and narrow credit spreads continue to point the market upward. The main concern remains inflation, which erodes the dollar and, under continued dovish policy, could eventually flip the bullish cycle into a bearish one.
• Housing Data: Recent reports showed weakness in building permits and housing starts, tied to elevated interest rates and labor market pressures.

Technical Picture

The market trades above all key averages, building value across all time frames, even decades. The path of least resistance remains higher. Traders are largely waiting for a meaningful pullback, likely sparked by weaker labor data or hotter inflation, to add to core long positions.
 

Global & Currency Side Note

The ECB holding rates while the Fed cuts creates a divergence that favors euro strength, pushing EUR/USD higher.

Recent Data Highlights

• Retail Sales: Stronger than expected, easing growth concerns but also raising the possibility of fewer or smaller rate cuts.
• Philadelphia Fed Manufacturing Index: Surged to 23.2 from -0.3 previously, another positive growth signal.
• Jobless Claims: Fell to 231K from 264K, showing resilience after the sharp NFP revisions.

Altogether, the data backdrop supports steady 25 bps monthly cuts as long as growth holds and labor conditions stabilize. For now, dips are being treated as buying opportunities, keeping the market well-supported at the highs.

Keep growing, keep winning.

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