Following the Fed’s widely anticipated 25-basis-point rate cut yesterday, the first since December 2024, markets reacted with initial caution, as the S&P 500 closed slightly lower amid questions about the pace of future easing. The Fed’s “dot plot” projections indicated two additional cuts by year-end 2025, aligning with expectations but signalling a cautious approach due to persistent inflation risks from tariffs and trade uncertainties. This has shifted focus to today’s economic data, which could influence sentiment on whether the economy is soft-landing or showing signs of slowdown.
Stock markets did not soar as many predicted on social media platforms because the news was priced in. Markets have been rallying for a while on optimism about lower interest rates. Markets are exhausted and ready to reverse direction. But today we continue to see strength in various markets, gold is of course the best indicator of future interest rates. Gold declined yesterday and today it is down again, this can be interpreted as bad news for stocks and cryptocurrencies.
Gold is telling us rates might not drop significantly. The Fed is signalling a slower pace of easing than some hoped. This hawkish tilt, combined with concerns about persistent inflation (from the rate cuts and tariffs), likely reduced expectations for aggressively lower real rates, which typically support gold. Therefore stock markets and cryptocurrencies will struggle to move higher.