While the odds favored the 50-bps cut, many were still thinking we’d only get 25-bps. The message to the markets was clear, the Fed does not want to fall behind the curve and hurt growth. “Soft Landing” hopes were reinvigorated, and money flowed into risk assets as can be seen in the grid.

While the odds favored the 50-bps cut, many were still thinking we’d only get 25-bps. The message to the markets was clear, the Fed does not want to fall behind the curve and hurt growth. “Soft Landing” hopes were reinvigorated, and money flowed into risk assets as can be seen in the grid.

Rather “firm” CPI and PPI reports last week were largely offset by the “Fed Whisperer” and better-than-expected guidance from giants Oracle and Nvidia.

September has a reputation on Wall Street for being volatile and this year is looking to validate that thesis with a few weak economic datapoints. While last week’s data is certainly concerning, it’s important to recognize that is does not constitute a trend at this point and the underlying backdrop (solid GDP growth, historically low unemployment, moderating inflation and a Federal Reserve Board signaling lower rates to come) is still favorable.

Solid economic data has taken back the recent growth scare we saw in August and the markets have rallied back towards their recent highs. AI and technology sector leadership has given way to the more economically sensitive cyclical/value sectors and there has been broad participation in the recent stock market advance. With Q2 earnings now largely behind us, investors will begin to shift their fucus on 2025 earnings and multiple thereof. This could allow for multiple expansion, especially considering the overall positive economic backdrop with solid 3% GDP growth, historically low unemployment, and inflation trending downward.