As widely expected, the Federal Reserve cut rates by 25bps and announced the end of the balance sheet runoff (QT) starting on December 1st. The statement was largely unchanged. The only "surprise" in the statement was that there were two dissents on opposite ends of the spectrum. Stephen Miran, a.k.a. the Dissident DOT, once again called for a 50bps cut while Jeffrey Schmid preferred to leave rates unchanged. If you paid attention to the Summary of Economic Projections or have listened to any of the recent speeches, you could argue this wasn’t a surprise at all. The market reaction ahead of the press conference was muted with equities virtually unchanged though yields did tick up a couple of basis points. The Fed also announced the end of its balance sheet run-off, as expected. It was pretty clear that Chair Powell had an agenda heading into the press conference, maintaing some optionality. His commentary around the economy during his prepared remarks were pretty consistent. However, he made sure to highlight that the path of monetary policy was not on a preset course saying a cut in December was “not a foregone conclusion, far from it”. This quickly sent the S&P 500 down ~1%, just a touch below yesterday’s low, while yields jumped 5bps. By the end of the day the S&P 500 recouped about half of that 1% drop, ending the session around unchanged. However, as markets throttled back the expectations for rate cuts it reinforced the rotational flows that have been happening throughout this week. Tech and the AI-complex rallied while the equal weight version of the S&P 500 and small/mid cap indices ended near the lows of the session off >1% about a 2% intraday decline. Tomorrow is setting up to be a big day. The highly anticipated meeting between President Trump/Xi is set to take place tonight. There are also rate decisions from the Bank of Japan and the ECB. After the close the first of the mega cap tech earnings have started to hit the tape.

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