Not so fast was the message that Jerome Powell signaled in last week’s Federal Reserve policy speech. Yes, the Federal Reserve cut the benchmark interest rate by 1/4 point to the 3.75-4.00 range which is what the market expected. However, after cutting the benchmark rate, Chairman Powell took to the podium (click here) and commented “there is no assurance that a December rate cut would occur” which immediately sent the stocks and the crypto market lower. Investors were caught off guard that the Chairman guided in this manner. In fairness to the Powell’s updated guidance, he also stated that because of the government shutdown there are no government economic data reports being released for the Fed to base any future decision on further interest rate cuts which makes sense.

What makes more sense is that Congress comes together now to reopen the government for all the reasons we know, including the restart of key economic reports that are issued by the government. How in the world can the Federal Reserve base policy decisions when they do not get the data they need from the government to assess the current state of the economy?  Investing and making investment decisions is already a complex process and the last thing we need is the leadership of this country to make it even more complex. Let’s hope Congress can come together sooner than later and reopen the government.

The good news is that the Fed did cut rates last week and this should bode well for the equity and crypto markets. Couple this with a better-than-expected Q3 earnings reporting season from corporate America and we should rally into year-end, especially if the government reopens. There are other factors at play such as coming to an agreement with China on trade and continuation of corporate earnings growth. Should all these factors align, then I would not be surprised to see a year-end rally.

Of course there is no guarantee that everything will align by year-end but despite the current uncertainties that we face what is impressive to me is that the Dow Jones Industrial Average (see chart here) the S&P 500 (see chart here), the Nasdaq Composite (see chart here) and the small-cap Russell 2000 (see chart here) are still trading near all-time highs.

Good luck to all 🙂

~George