Markets Adjusting To Life After Rate Cuts

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

Growth stocks rebounded last week, but AI-related names did not participate as much in the rebound.  Last week's inflation numbers were fairly muted as September's data showed a slight increase in the Consumer Price Index for the month, but on a year-over-year basis, the trend was still lower.  The sticky element to inflation remains insurance - auto to be specific.  However, basic food necessities - fruits & vegetables, dairy, bakery, & foot at home - are manageable.  Recent consumer survey data shows that dining out is an area where spending is likely to decrease and the CPI numbers for September show Food Away From Home to be stubbornly high.

The first earnings numbers for the third quarter came in last week.  All four banks/financial institutions - JP Morgan, Wells Fargo, Blackrock, & Bank of NY Mellon - exceeded earnings expectations.  However, during the 3rd quarter, analysts lowered EPS (earnings-per-share) estimates by a larger margin than in the past.  Most analysts cite a "possible economic slowdown" as their primary reason for the downward revisions.  Markets are also adjusting to the idea that another 50 bps rate cut is likely off the table.  Fed futures are showing a 0% probability of a 50 basis point cut and even a 16% probability of no rate cut in November.

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