So the Fed just had their little meeting, and guess what? They basically told the stock market, “Go ahead, have your fun.” It wasn’t the cleanest breakup with hawkish policy, but it was good enough to get the party started.
Here’s what went down: Jerome Powell and his crew cut rates by a quarter point (as expected), but then Powell got all wishy-washy in the press conference, talking about being “close to neutral” and maybe hitting the pause button on future cuts. Cue the collective eye-roll from traders everywhere.
But here’s the thing everyone’s missing while they’re busy dissecting Powell’s every word – the Fed’s own dot plot is basically giving him the side-eye. Half the Fed wants to keep cutting, and guess what? The pro-cut camp is about to get a lot more influential when the new administration rolls in.
The Real Story: The Fed Stepped Aside
Look, the market didn’t want perfection from this Fed meeting. It wanted the central bank to stop being a buzzkill. Mission accomplished. The hiking cycle is done, finished, kaput. That’s huge.
Think of it this way: the Fed was like that friend who keeps saying “we should probably head home soon” every time you’re having a good time. Well, they just stopped saying that. They’re not necessarily buying the next round, but they’re not calling an Uber either.
Meanwhile, AI is Having Its Own Party
While everyone was obsessing over Fed speak, the AI boom just kept doing its thing. Enterprise AI demand? Still red-hot. Big Tech earnings? Still crushing it. AI infrastructure spending? Through the roof.
The beautiful thing about AI growth is it doesn’t need rate cuts to exist – it just gets turbo-charged when they happen. It’s like having a really good business that becomes an absolutely insane business when borrowing gets cheaper.
Cloud spending tied to AI workloads keeps growing. Companies are reshaping their entire balance sheets around automation and intelligence. Governments are treating AI like a national security priority. This isn’t some bubble waiting to pop – it’s a fundamental shift in how business gets done.
Why This Sets Up a Santa Rally
Here’s the magic formula: AI is driving real earnings growth, and the Fed just removed the biggest obstacle to higher valuations. When those two forces align, you get what Wall Street calls a “melt-up” – and what normal people call “holy crap, my portfolio is doing really well.”
The setup looks familiar to anyone who’s seen year-end rallies before. Early uncertainty? Check. Mid-stream skepticism? Check. Then suddenly everyone realizes they’re underexposed and starts chasing performance.
Fund managers who stayed cautious are about to get FOMO. Risk managers are loosening up because volatility is contained. And AI-linked stocks keep breaking higher, dragging everything else along for the ride.
So yeah, Santa might be coming early this year. The Fed gave him clearance for takeoff, and AI is providing the rocket fuel. Just don’t expect Powell to admit he’s helping – central bankers are allergic to taking credit for good times.
The runway is clear, folks. Time to buckle up.