From Barron's yesterday, November 14:
Trump fills out cabinet picks, Cisco raises outlook, Super Micro stock faces delisting, and other news to start your day.
It’s true stock markets are typically forward-looking but they can also be selective. Now investors seem happy to downplay some longer-term pain in favor of short-term gain.
President-elect Donald Trump’s victory rally is rumbling on, albeit at a slightly more stately pace for now. The S&P 500 eked out another day of gains Wednesday–that’s six out of the past seven days. Investors are feeling relaxed, the market’s fear gauge–the CBOE Volatility Index–fell to a four-month low yesterday.
Not even an uptick in inflation took the edge off the good vibes. The consumer price index rose at an annual rate of 2.6% in October, up from 2.4% in September–crucially it was in line with expectations.
In a parallel universe, such a rise may have hurt stocks, or even dampened rate-cut expectations. The opposite happened–traders are growing in confidence that the Federal Reserve will cut rates by another quarter-point in December.
But the outlook for interest rates in 2025 is only becoming less certain. The market is currently pricing in a half-point worth of cuts by June–a month ago they were predicting a full percentage point cut from current levels. The possibility of inflationary Trump policies is perhaps being priced in.
While puzzling at first, Wednesday’s reaction makes sense. The Fed can’t preempt Trump’s policies and can only look at the data. Stock markets aren’t missing the future risk–it’s there for all to see as long-term Treasury yields creep higher. Investors are just choosing to seize the day as Trump trades continue to lift sentiment.
At some point that will change, possibly when the president-elect takes office and starts setting out his policy agenda....
....MUCH MORE
