The Fed cut rates by 25 basis points yesterday to a range of 4.25–4.50%, and its Summary of Economic Projections (SEP) indicated that by the end of 2025, it will cut rates by a total of half a percentage point, considering the robust labor market and slowly declining inflation.
The Fed disappointed some investors with these comments, suggesting more cautious policy easing next year. In addition, investors are concerned that some of Trump's expected measures, such as increased tariff pressure, may trigger inflation again.
Higher interest rates are generally seen as an obstacle for the stock market because they make less risky assets more attractive, while increasing the borrowing costs and limiting the companies' ability to boost earnings.
Each of the 11 major sectors of the S&P 500 Index declined, including real estate and consumer staples.
Such jittery market reaction is likely to be short-term, as the Fed's policy reversal is not in question, but rather some slowdown in cutting rates. Technically, starting from mid-summer, the S&P 500 Index seemed to be in the overbought zone, and a correction was inevitable. An event that would trigger this corrective movement was required. Especially, when the seasonal growth of the stock market is coming to an end, and from the middle of January through February the stock market quotes will start to weaken.
However, there are still 2–3 weeks of potential growth left, and yesterday's drop will probably be rebounded up to the 6030 resistance level.
The overall recommendation is to buy S&P 500.
Profits should be taken at the level of 6030. A Stop loss could be set at the level of 5850.
The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
