May 30, 2024
Investors

Holiday season: Fed optimism cheers investors


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Christmas has come early for Wall Street, said John Cassidy in The New Yorker. After nearly two years spent fighting inflation with a historic cycle of drastic tightening, the Federal Reserve last week indicated it is “likely to cut a key interest rate three times next year.” The nod to a long-anticipated “pivot” —  from rate hikes to cuts — spurred a euphoric reaction in the stock market, which sent the Dow Jones industrial average to a record high. The central bank seems to be “playing catch-up” to inflation, which has dropped to about 3%. Holding borrowing rates well above that figure could end up “driving the economy into recession.” This wasn’t fully a “declaration of victory over inflation,” but it was still music to investors’ ears. And rate cuts carry implications that “go well beyond the stock market,” reducing the costs of borrowing “on everything from home loans and car loans to business overdrafts.”



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