Equities Inched Higher As The Fed Waiting Game Begins

Equities ticked slightly higher as investors await the final Fed meeting of 2025. Markets have been trading in-line with futures on the next Fed interest rate decision. Prior to

November, futures on a December rate cut had hovered around 80%. Fed speakers started hedging on whether a December rate cut would happen, so futures dropped to only a 30% probability for the December cut, pulling equities down with it. The Fed bolstered a December cut on November 20th, pushing the probabilities back up to 90%. As it stands at the beginning of this week, there is an 88% probability of a rate cut on Wednesday. We'll see if the Fed can bring this one home.

Some have pegged any interest rate decision on the condition of the labor market. Despite headline layoff announcements, jobless claims are not providing any danger

signals as of yet. In fact, Initial Jobless Claims came in this week well below expectations. The market was expecting 219,000 claims, but the actual number was 191,000. That's the lowest weekly reading since September of 2022. The PCE Price Index for September was finally released and it showed that inflation was largely in-check as the year-over-year reading was just slightly higher at +2.8%, versus +2.7% in August. If inflation is largely in check and claims are no where near recessionary levels, this is further good news for a rate cut this week.

The consumer remains resilient at the beginning of the holiday spending season. Online sales reached $44.2 billion from Thanksgiving through Cyber Monday, an

increase of +7.7% year-over-year. The ramp up showed in the Redbook Sales figures as well, as the sales were up +7.6% last week on a year-over-year basis. That's the highest weekly reading yet in 2025. We fell just short of getting a 2nd Zweig Breadth Thrust, like the one that triggered in April. However, even when we get an "almost" thrust trigger, equities 1 month and 2 months later are positive 100% of the time. This should bode well for a positive December finish. Trading this week will depend on the Fed rate decision and the language used to forecast the first Fed meeting in January.

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