Ahead of the Federal Reserve’s policy announcement on Wednesday, stock markets anticipated no change to interest rates. Instead of communicating several cuts in 2024, the Fed now sees just one cut. Markets did not panic. While the Dow fell by 0.09%, the Nasdaq (QQQ), S&P 500 (SPY), and Russell 2000 (IWM) closed higher on the day.
Based on the Fed official’s collective forecast, the central bank plans to cut rates four times in 2025, up from three times.
For several weeks, food stocks traded lower. Kraft (KHC), ConAgra Foods (CAG), and Pepsi (PEP) weakened.
Although the CPI report indicated flat inflation growth, for the first time this year, markets are wary. Rising prices for automotive insurance, homeowner insurance, and healthcare costs reduce disposable income levels. People are cutting back on spending on food since that is one of their few choices.
For over a year, shares of Chubb (CB), Manulife (MFC), and Prudential Financial (PRU) have been the best-performing insurance stocks.
Consumers are highly skeptical that the economy needs an interest rate cut. Inflation is sticky. After minimum wages rose, inflation in the service economy did not slow down.
Your Takeaway
The long-term bond market is more attractive, so watch TLT stock. Bank stocks largely priced in the healthy economy ahead. Expect Morgan Stanley (MS) and JP Morgan (JPM) shares to pull back after a great runup.
