Tech stocks just took a victory lap, pushing the Nasdaq to a record high and the S&P 500 to levels never seen before. Salesforce (CRM, Financial) led the charge, skyrocketing 11% after hyping progress in its Agentforce AI system, while chipmaker Marvell surged 23% on blowout earnings. Investors are loving the AI narrative right now, but here's the kicker—Jerome Powell, the Federal Reserve Chair, is keeping a close eye on inflation and signaling a slower pace for rate cuts. Markets aren't sweating it though; the odds of a December rate cut just ticked up to 77.5%.
Powell dropped some key insights at the New York Times DealBook Summit, calling the U.S. economy “stronger than we thought.” Translation? Inflation is still sticky, but growth is outpacing expectations, giving the Fed room to tread carefully. The labor market isn't crumbling, and consumer spending is holding steady, which means the Fed's next rate cut—widely expected this month—might be more of a nudge than a plunge. It's a delicate dance: support growth without reigniting inflation, all while navigating the wildcard of incoming tariffs from President-elect Trump.
So, what's the play for investors? Tech continues to shine, with Nvidia (NVDA, Financial) and Amazon (AMZN, Financial) climbing while other sectors like energy struggled. But Powell's message is clear—don't expect aggressive moves from the Fed. As we close out 2024, investors should be prepared for a market driven by AI optimism and a Fed that's cautiously optimistic but unwilling to get ahead of itself. Buckle up; 2025 is shaping up to be just as unpredictable as this year.
