Good morning! Between the election, Wall Street’s reaction to the election, and then the Federal Reserve decision, this goes down as one of the most hectic week in markets of the year.

Let’s unpack what comes next for the central bank and US economy.

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Cut, cut…pause?

The Federal Reserve did what everyone expected Thursday by lowering its benchmark interest rate 25 basis points into the 4.5-4.75% range.

Fed Chair Jerome Powell said he remains confident that inflation is moving in the right direction and that the labor market is still sturdy, but the path ahead isn’t entirely clear.

“We don't think it's a good time to be doing a lot of forward guidance,” Powell said, adding that “a fair amount of uncertainty” awaits.

Thursday’s move follows a larger 50-basis-point cut in September.

“The easy cuts have been made, and maybe December won’t be too contentious either,” said Elyse Ausenbaugh, head of investment strategy at JPMorgan Asset Management.

Before the announcement, markets saw 70% odds of the same size adjustment next month, according to CME data.

After Powell’s press conference, those odds ticked up to 73.5%.

Chances of a January move — which would happen as the first Fed meeting under Donald Trump’s new administration — have dropped to 26% from 47% a week earlier.

The odds of a “pause” now hover at 56.4%.

At the start of September, traders had forecasted the benchmark rate could fall into the 2.75-3.00% range by the end of next year.

That outlook has since repriced roughly 100 basis points higher.

“The main reason for this shift in expectations is that concerns about a weakening economy and labor market have diminished,” Preston Caldwell, chief US economist at Morningstar, said after the meeting.

The Fed isn’t focused on Trump

While central bankers can’t say it aloud, the uncertainty around what comes next is tied to President Trump, who has a colorful history with the Fed chief.

“I imagine the Fed is asking the same questions as investors,” said Ausenbaugh. “To what extent and when will the incoming Trump administration implement its campaign policy proposals?”

Reporters at Thursday’s press conference alluded to it as they asked him whether the incoming administration would impact the Fed, which is a non-political entity.

“In the near term, the election will have no effects on our policy decisions,” Powell said.

He reiterated his team is not focused on the impact of what may or may not happen in the future. Whether Trump catalyzes higher or lower inflation in the years to come has nothing to do with what the Fed does in the here and now.

“We don't guess, we don't speculate, and we don't assume,” Powell maintained.

Some commentators have floated that Trump may seek to replace the head of the Fed in 2025 or 2026, though Powell had little to say on the matter.

When asked whether he would resign if the president asked him to, Powell gave a resounding answer:

“No.”

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Elsewhere:

📈 Stocks keep ripping. The S&P 500 and Nasdaq Composite both closed at fresh records Tuesday, riding momentum from the election and unbothered from the central bank update. The Dow also touched an intra-day record high, following up its absurd Wednesday performance in which it saw a 1,500 point gain.

🤯 Nvidia is worth $3.6 trillion. The chipmaker is the first company ever to reach that market capitalization, which it reached Thursday as its stock climbed 2.2% to a record high. On top of the AI enthusiasm, traders are optimistic about tax cuts and lower regulations under Trump. (Yahoo Finance)

💼 Jobless claims rose slightly. The US just saw initial weekly unemployment filings climb to 221,000, above consensus forecasts for 220,000. While the labor market is softening, wage pressures have not cooled too much. Unit labor costs advanced at a strong 1.9%. (Reuters)

Rapid-fire:

• Tesla stock notches its highest closing price since September 2022 (Barron’s)

• AirBnB stock reported a strong $3.73 billion in revenue for the third quarter and its stock popped after hours (CNBC)

• A JPMorgan strategist warned of an economic red flag after Trump’s election victory (Business Insider)

• Monster Beverage missed quarterly results on weak consumer demand (Reuters)

• Pinterest stock tanked after-hours as it reported strong earnings but weak guidance for the coming months (CNBC)

• The median annual home insurance premium rose 33% between 2020 and 2023 (ResiClub)

• DoubleLine Capital CEO Jeffrey Gundlach says he expects more debt and high bond yields if Republicans capture the House (CNBC)

Podcast:

I sat down with Anthony Pompliano, CEO of Professional Capital Management, to discuss how Trump’s victory has impacted bitcoin and stocks, as well as the role of prediction markets in the election.

Last thing:

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