Wall Street bulls made a valiant effort, pushing the stock market higher on Friday with a double dose of encouraging news. But the rally wasn’t enough to overcome Wednesday’s Fed-induced slump.

The S&P 500 fell for the second week in a row, losing 2%, while the Dow Jones Industrial Average posted three consecutive weeks of losses, with a loss of more than 2.2%. The Nasdaq posted a weekly decline of 1.8%, breaking a four-week winning streak. Under the hood of the S&P 500, all sectors ended the week lower despite Friday’s rally. Energy was the worst performing sector, followed by real estate and materials.

Investors received several major pieces of news that impacted markets this week – the most consequential being the Fed’s 25 basis point interest rate cut at the conclusion of its two-day December meeting on Wednesday afternoon. Although the move was widely expected, the market expressed concerns about the Monetary Policy Committee’s more hawkish forecast for interest rate cuts in 2025. The so-called dot plot, which represents central bankers’ future interest rate expectations, suggested that the committee agreed that that it will be appropriate to cut interest rates only twice next year, which is half of the measures announced in September.

There is no denying that interest rate expectations are important, but we would like to caution club members that updates like these add too much weight to investment decisions. While we now know who will be in the White House on Inauguration Day on January 20th, and have since received more information on inflation and the job market, no one really knows what 2025 will bring. There will be countless updates on inflation, interest rates, geopolitics and much more in the coming months, some of which we can predict and others that will come as a complete surprise. The Fed will adjust its outlook accordingly, as it has been and should be.

We certainly don’t want to fight the Fed, but we also don’t want every word out of a Fed official’s mouth to send us running to our brokerage account and making sweeping changes to our exposure. Rather, as long-term investors, we have the luxury of knowing that we have the opportunity to buy shares in great companies with staying power when the market might overreact to news from the Fed or some other event. That’s exactly what we did last week as the market became increasingly oversold according to our trusty S&P 500 Short Range Oscillator. In other words, continue to focus on the fundamentals and use volatility to your advantage.

The other big update came Friday with the lower-than-expected personal consumption expenditures (PCE) price index, the Federal Reserve’s favorite inflation indicator. The headline November PCE saw a 2.4% increase versus the expected 2.5% rise. Core PCE, excluding fluctuating food and energy prices, rose 2.8% year-on-year versus expected rise of 2.9%.

Although the PCE data was still above the Fed’s 2% inflation rate target, it was exactly what the oversold market needed and it took off, turning sharp premarket losses into a powerful Friday rally. Chicago Fed President Austan Goolsbee told CNBC in a Friday interview that if the economic conditions of the last 18 months continue over the next 12 to 18 months, “interest rates will go down quite a bit further,” giving the market a further boost to help provide an upswing. Goolsbee’s comments calmed a nervous market following Fed Chairman Jerome Powell’s hawkish comments in his post-meeting press conference on Wednesday.

Not to mention, it’s not necessarily a bad thing if interest rates stay high for longer, as it almost certainly means the economy is still growing, and we would much rather be in a market struggling with high interest rates has because the economy is strong than in a The market benefits from low interest rates as the economy struggles to avoid a recession.

• Other economic news last week included November retail sales, which were mixed and headlines beat expectations. However, the results were poor when auto and gasoline sales were excluded. Industrial production and capacity utilization in November fell short of expectations. The third and final gross domestic product figure for the third quarter was better than estimates. In the press release, the Bureau of Economic Analysis said updated GDP, which measures U.S. economic activity, “primarily reflects upward revisions in exports and consumer spending, partially offset by a downward revision in private inventory investment.” Imports, which represent a subtraction.” calculation of GDP, have been revised upwards.” November’s real estate launch was disappointing, but existing home sales in November exceeded expectations.

• Within the portfolio, no company reported profits, but we opened a new position in Goldman Sachs when trimming and downgrading Morgan Stanley to a 3 rating. As noted in Thursday’s trading alert, we began the transition because Goldman Sachs’ exposure to investment banking is much more significant than Morgan Stanley’s — and if capital markets activity accelerates over the next few years, as many analysts expect, We will want to be invested with the highest quality investment bank. We have also decided to reduce and downgrade our position Advanced micro devices to our 3 rating. Initially, it was assumed that AMD would be a winner because it offers alternatives to the club name NvidiaWhat we’re seeing now is that Nvidia is even deeper rooted than we thought, and as companies look for alternatives, they’re more likely to focus on custom chip solutions like those made by Broadcom And Marvell technologythan general GPU alternatives. While we like Broadcom for the long term, we trimmed and downgraded the stock after it went parabolic following strong gains the previous week.

Looking ahead, it will be a light week as the stock market closes at 1:00 p.m. ET on Tuesday and remains closed all day on Wednesday, Christmas Day. However, November new home sales begin on Tuesday. Housing reports have been and remain an important point of focus for investors as housing cost inflation has proven extremely persistent and is a key source of upward pressure on inflation, which in turn keeps interest rates high. However, investors should take any positive update from Tuesday’s report with caution. Mortgage rates rebounded after the Fed’s interest rate announcement on Wednesday, and investors will be much more focused on figuring out what that means for future home sales and affordability than on what’s in this retrospective release.

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