Market Slippage Following Fed Rate Decision
Following Federal Reserve Chair Jerome Powell’s announcement of a 25 basis points rate cut on Wednesday, coupled with hawkish commentary, the market has experienced a two-day downturn. While the Fed’s December dot plot projects only two additional rate cuts in 2025, Louis Navellier, Chairman and Founder of Navellier & Associates, anticipates up to four cuts.
Navellier’s Analysis: Overreaction and Potential Buying Opportunity
Navellier contends that the market’s reaction to the Federal Open Market Committee (FOMC) statement, the dot plot, and Powell’s press conference was an overreaction, negating post-election gains. He points to Powell’s admission that the Fed’s year-end inflation forecast was off target as a factor eroding confidence. His forecast is based on the anticipation of falling interest rates in the Eurozone as Germany and France, Europe’s largest economies, are heading towards recession. He projects 4-5 interest rate cuts by the European Central Bank in 2025.
Geopolitical Instability and its Impact on US Rates
Navellier highlights the political crises in both France and Germany, suggesting a lack of leadership could further influence the economic outlook. This instability, he argues, will translate into declining U.S. Treasury yields, leading to further Fed rate cuts. He emphasizes the significance of Powell’s comment that the decision on the rate cut was a close call, suggesting uncertainty within the Fed.
Market Performance and Investment Outlook
The SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) have both seen declines of over 3% in the past five trading sessions. Despite this recent dip, the ETFs remain up significantly year-to-date (24% and 27.72%, respectively). Navellier views the current market pullback as a potential buying opportunity, contingent on earnings continuing their expected growth trajectory. The situation warrants close monitoring of global economic factors and their impact on the US economy.
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