When we were younger, after school, and over the summers, my three brothers and I worked at our Dad’s feedstore.  The highlight most days was ordering What-a-Burger, or Sonic, for lunch.  One day, one brother was disappointed because his burger was to have mustard, and it had mayonnaise.   Another brother’s burger was to have mayonnaise, and it had mustard.  It wasn’t until complaining to the store manager about the mix-up did we realize all that was needed to fix the situation was to trade burgers.  As it turns out, there really wasn’t a problem.   They both had exactly what they wanted and expected.

How about you?   Have you ever found yourself getting exactly what you expected and then being disappointed?  If so, you can relate to the stock market’s reaction after today’s Fed decision.

Investors and strategists widely expected the Federal Reserve to cut interest rates today by a quarter of one percent.  That is exactly what the FOMC did.  Furthermore, many anticipated the Fed lowering their anticipated number of rate cuts next year, as well.  This also happened.

Often times, investors refer to things believed to be widely known as being “priced -in” the market.  That is why it is rather surprising to see today’s market drop after meeting expectations.

Is today’s market response due to the economy remaining resilient and inflation hovering over the Fed’s preferred rate of 2%?  Or, might the drop be due to something else?  Regardless, the recent pullback is likely temporary as corporate earnings are looking strong, and street consensus suggests even higher corporate earnings next year.

Here is the question: in the coming months and years, will investors realize they are getting what they want in the form of potentially higher corporate earnings and  possible lower costs, resulting in a more reasonably priced earnings multiple, along with likely increased M&A activity?  Or, would they rather have a less resilient economy requiring Fed intervention?  Although it might not be as simple as trading hamburgers with one another, we might find it to be a blessing believing the economy is likely resilient enough to not warrant more aggressive easing from the Fed.

Tomorrow, we will be watching the third reading of Q3 GDP.  Friday, all eyes will be on the PCE monthly report which serves as the Fed’ preferred gage of inflation.

Despite the recent weakness in the markets, 2024 returns have been strong for many equity investors.  As we continue to work on yearend planning, please know we are here if anything is needed or to discuss portfolio specifics in greater detail.

May this time of year be spent with those you love, reminiscing over stories and times from the past.  For us, imagine we will have a laugh or two over lessons learned at the feedstore.  If we don’t talk prior, wishing you and yours Happy Holidays and a most prosperous New Year!