Our discussions have included Fed policy, the economy, and the surge in inflation since the pandemic. Why? In large part, they are all a part of the stock market pricing equation.

Everyday shoppers are relieved prices aren’t rising at 2022’s pace, but their primary focus has been on the current price level, which is much higher than pre-pandemic levels.

It came as no surprise that the Fed reduced its key rate, the fed funds rate, by 25 basis points (bp, 1 bp = 0.01%) to a range of 4.50—4.75%. That follows the Fed’s 50 bp rate cut in September.

A closely watched tool from the CME Group is pricing in a quarter-point rate cut at the November 7th Fed meeting, and it favors another quarter-point rate cut at the December 18th meeting.

The bull market turned two years old last week. Since bottoming, the S&P 500 Index has climbed almost 64% (through 10/17/24).

A recent online advertisement from a major bank read, “The Fed just lowered interest rates. Could refinancing save you money?”

The U.S. Bureau of Economic Analysis reported that the Gross Domestic Product (GDP), the largest measure of goods and services, expanded at a brisk annualized pace of 2.8% in the second quarter.

In 2021 and 2022, soaring inflation sparked the most aggressive series of rate hikes in decades. While prices remain high, the rate of those price increases has slowed, and the Federal Reserve may finally be seriously considering a reduction in interest rates.