Right after the Federal Open Market Committee (FOMC) meeting, I found this in my inbox: a sale announcement from Crate & Barrel featuring hemp pillows and comforters. It dawned on me that this was perfectly timed for the Fed meeting and economic forecast.

Yesterday, the Fed was still pushing a soft landing (hence, the pillows), but it seemed out of sorts on the communique and Powell’s replies during the Q&A (hence, the hemp).

Tripping?

The Fed lifted the 2024 Gross Domestic Product (GDP) to 2.1% from 1.4%, unemployment to 4.0% from 4.1%, and the Core Personal Consumption Expenditures (PCE) inflation to 2.6% from 2.4%.

Against this backdrop, the Fed sees itself cutting rates three times, although 9 out of 19 members see rates higher than the 4.6% consensus.  I suspect there might be two cuts when it’s all said and done.

Three Cuts Is Good Enough

Heading into the session, Goldman Sachs (GS) was modeling for three rate cuts, and now they are convinced the first will happen in June.

(Too) Hungry for Action

Even before the decision, global fund managers had an enhanced appetite for risk. Some say this is a contrarian signal to sell. I say let them buy and lift our positions.

Stocks React

The Fed’s rosy outlook and effort to keep the soft-landing narrative alive, even as it contradicted its economic forecast, propelled stocks higher.

It was back into growth sectors, led by Consumer Discretionary (XLY), which was led by automobiles & components.

It was good to see the Consumer Discretionary rally without Amazon (AMZN) and/or Tesla (TSLA) doing the heavy lifting. Automakers, cruise ships, casinos, and expensive fast food set the pace.

Same Tide Lifts Small-Caps More

The Russell 2000 bounced off its 50-day moving average (again), and according to the Relative Strength Indicator, it has room to run.

Today’s Session

The AI story jumps back to center stage with the stock of the day, Micron (MU) surging on financial results that simply crushed Wall Street consensus.

The Semis will power out the gate this morning – you have to have exposure.

Stealth Rally

Cooper is coming on strong.  The next leg up could spark a fire and great sense of urgency.

S&P 500 Materials are in the midst of a monster move that’s not on many radars. 

 

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