It looks like Donald Trump decided to take a break this week. Apparently, in the circle of his closest associates, he enjoyed the results of his “fantastically epic” phone conversations with his Ukrainian and Russian counterparts. At least there have been fewer fateful statements about the conquest of nations, the seizure of sovereign territories, and a radical change in the world order in recent days, which gave investors the opportunity to focus on discussing the results of the last Fed meeting and the final press conference of the central bank’s chairman, Jerome Powell. And there really was a lot to discuss. This is a quick review from Ivan Kompan, Edinburgh Business School analyst.
The Fed left interest rates unchanged, as expected, raised the inflation forecast from 2.5% to 2.7%, lowered economic growth expectations from 2.1% to 1.7%, and maintained its rate-cut projection for the year—two 25 bp reductions. It also approved slowing its balance sheet reduction (QT) to “avoid money market disruptions.” Markets surged, with the S&P 500 seeing its biggest post-Fed-meeting gain since June. But why the optimism when inflation is rising and growth is slowing?
The key factor seems to be the slowdown in QT. By reducing the pace of bond sales, the Fed aims to lower yields and borrowing costs, easing pressure on equities. At the press conference, Powell struck a moderate tone, reassuring that the economy remains “healthy” and recession risks, though slightly higher, are “not significant.” However, his revival of the “transitory inflation” narrative raised concerns—echoing the 2022 scenario when inflation proved anything but temporary.
Tesla continues its decline, with shares down 41.5% YTD. Major investors are urging Musk to focus on business rather than politics, as sales slow, insurance costs rise, and European subsidies disappear. With Chinese EV giants and Waymo gaining ground, Tesla’s competitive edge is shrinking.
By Friday morning, the S&P 500 had exited correction territory, while the Nasdaq remained there. Forecasts are turning more bearish: RBC Capital Markets cut its year-end S&P 500 target from 6,600 to 6,200, citing headwinds from economic uncertainty. Meanwhile, European markets are thriving—CAC 40 is up 9.5% YTD, Euronext 100 by 10%, and DAX by 15%—suggesting that global diversification is back in favor, much like after the 2000 dot-com crash.
*And finally, we would like to remind you that the information you have just listened to is not an investment advisory. Remember – investments in the stock market are always tied up with financial risks. So be careful and cautious.
