The Powell That Stole Christmas, Predicted Volatility, & What Wall Street Won’t Tell You

In this week’s episode, the Wise Money guys review a turbulent week on Wall Street, with the Dow Jones falling 988 points (-2.3%), the S&P 500 declining 120 points (-2%), and the NASDAQ dropping 354 points (-1.8%). Despite the weekly losses, year-to-date gains remain strong, with the Dow up 13.7%, the S&P 500 up 24.3%, and the NASDAQ up 30.4%. The team reflects on the market's reaction to the Federal Reserve’s latest meeting, drawing comparisons to 2018’s December volatility. With the Fed signaling fewer rate cuts than anticipated for 2025, the markets responded with a knee-jerk decline, raising questions about clarity and consistency in messaging.

The discussion highlights the challenges of interpreting Fed communications, as markets grapple with the transition back to "data dependency" and uncertainty surrounding future policy decisions. The guys explore the S&P 500’s dip below its 50-day moving average midweek and its recovery to that level by Friday, analyzing whether this correction presents a buying opportunity. They also dive into the implications of inflation’s persistence and the broader economic outlook as investors prepare for 2024.

Predicted Volatility

The predicted volatility in the markets stems from uncertainty surrounding Federal Reserve policy, particularly the pace and extent of interest rate cuts in 2025. The Fed's recent shift back to a "data-dependent" approach and mixed messaging have created confusion among investors, leading to sharp market reactions. This uncertainty is further compounded by inflation’s persistence, despite rate hikes, and broader economic concerns like wage growth, housing affordability, and geopolitical factors. As the market adjusts to these evolving dynamics, investors should brace for more fluctuations in the months ahead.

In the second hour, the Money Wise guys divulge what Wall Street Won’t Tell You. You don’t want to miss the details! Tune in for the full discussion on your favorite podcast provider or at davidsoncap.com, where you can also learn more about the Money Wise guys or take advantage of a portfolio review and analysis with Davidson Capital Management.