(910) 319-7834
The Federal Reserve cut interest rates by .25% on Wednesday of this week, however they indicated cuts in 2025 may be fewer than originally anticipated.
Major Index Performances (as of Thursday):
- S&P 500: The benchmark index dropped (-3.04%)
- Dow Jones Industrial Average: The Dow decreased (-3.34%)
- Nasdaq Composite: The index is down (-2.78%)
- Gold: The Precious metal fell (-2.35%)
Federal Reserve’s outlook on cutting rates:
Federal Reserve Chairman Jerome Powell announced a .25% interest rate cut on Wednesday December 17th. Wall street usually celebrates rate cuts, as lowering borrowing costs drives spending by consumers and businesses. But instead of an afternoon rally, the markets sold off, with the S&P 500 and Dow Jones declining nearly 3%, the largest dip after a fed meeting since 2001, and the Nasdaq 100 dipped nearly 4%. So, what happened? For most of 2024 it was anticipated that the Federal Reserve would lower rates this year and continue those rate cuts in 2025. Betting on the future, markets already priced 4 to 6 rate cuts during 2025, but Chairman Powell revised his original plan by stating that just two rate cuts should be expected next year. Voila, a selloff was born.
Have you ever believed something to be true, but hoped it wasn’t?:
In the fall of 2015, the Carolina Panthers, led by quarterback Cam Newton, started on a journey that no one anticipated. The Panthers won their first 14 games and finished the regular season 15-1. I cheered the Panthers all year, and though their success was undeniable, they never seemed to be on solid footing. When it was time for Super Bowl 50, even the most pessimistic sports reporters were now believers. The Panthers were 5.5-point favorites. Every fan wanted to believe in the Panthers and cheer them to a Super Bowl victory. But in my mind, I just could not see them winning. This is one of those times when being wrong would make me very happy.
For money managers like OmniStar, the two-year market rally of 2023 and 2024 has been much like the Panthers 15-1 season. Much the same, here we are, heading into 2025, and everything is on the line. Many analysts who have been calling for a correction have turned bullish. What gives? Have they changed their mind because of “following the crowd syndrome”? Regardless, we are maintaining our defensive stance. Like Super Bowl 50 for Panthers fans, we hope to be wrong. Let’s draw some comparisons from the Panthers Super Bowl team and the current economic outlook. For most of the 2015 season the Panther offensive line played well and protected Cam Newton, in the Super Bowl, the Broncos tied the Bowl record with 7 sacks. The consumer has protected the economy for two years. Unemployment has been low, and spending has continued. We think unemployment could rise in 2025 and consumer spending may slow.
During the regular season the Panthers had the best turnover ratio in the NFL. In the big game the Panthers turned the ball over four times and only recorded two take aways. For the last two years Artificial Intelligence has been a major contributor to the markets winning streak, with technology giants Nvidia, Broadcom, and Meta leading the charge. If any of the tech giants were to fumble, and miss earning or revenue forecast, we reckon this could ignite a broad sell off.
The Super Bowl was just one game, and it could have gone either way. 2025 is just one year, and it too could go either way. It is often said that offense may get you to the big game, but defence wins it. For us, 2025 will signify the time to put the defence on the field.
Have a wonderful weekend and Merry Christmas,
The OmniStar Investment Team
.
