Stocks Reach Record Highs on Anticipated Fed Rate Cuts; Bonds up Sharply

Good morning,

The Dow (+1.0%), NASDAQ (+2.0%), and S&P 500 (+1.6%) exhibited modest gains, as each index reached all-time highs last week.  Meanwhile, taxable bonds gained 0.4% and tax-free municipal bonds rose sharply (up 1.5%) to reverse a downward trend over the past 6 months.  The 10-year Treasury fell 0.03% to finish the week at 4.06%, still above the 4% mark.

All US stock indices were up, as investors are buying stocks in advance of the anticipated Fed interest rate cuts this week.  As previously noted, the Fed’s mandates are based on supporting the job market and maintaining price stability (low inflation).  In recent months, the job market has been showing signs of weakness, as evidenced by last week’s unemployment claims that hit a 4-year high.  However, inflation has been tamer than anticipated, as evidenced by Producer Price Index (PPI) data showed a drop last month, and Consumer Price Index (CPI) reported in line with expectations.  Many economists have been expecting inflationary pressure due to the tariffs, and that hasn’t reared its head like many pundits believed.

All eyes will be on the Fed this week, as they are expected to cut interest rates for the first time in 2025.  It is widely expected that rates will be cut by 0.25%, but some economists believe the Fed could cut rates by as much as 0.5%.  In addition to the Fed’s announcement, they will be reporting their “dot-plot”, which shows each of the member’s expectations of interest rates in the future, which provides investors and economists with an idea of the Fed’s intentions in the near future.

Have a great day and terrific week!

^{Source:  Yahoo Finance}

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}

^{The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.}