Okay, so Jerome Powell just did something that’s basically the financial equivalent of your mom saying “fine, stay out past curfew.” The Fed cut rates again, and while Powell tried to sound all serious and cautious in his press conference, the market basically heard: “We’re stepping out of your way, kids. Have fun.”
Here’s what actually happened behind all the Fed-speak gibberish: They cut rates by 0.25%, which everyone expected. But more importantly, they’re basically admitting they’re done being the party poopers of 2025.
The Fed’s Mixed Messages (And Why Only One Matters)
Powell tried to play it cool, saying they’re “close to neutral” and might pause future cuts. Classic Fed move – give with one hand, take with the other. But here’s the thing: the dot plot (that’s Fed-speak for “what we actually think”) tells a completely different story.
The Fed is basically split into two camps right now. Team Powell wants to pump the brakes, but Team Cut-More-Rates is gaining ground fast. And guess what? Kevin Hassett, who’s likely replacing Powell soon, is firmly in the “let’s cut more rates” camp.
So when Powell says “we might pause,” the market’s basically thinking “yeah, sure buddy, for like five minutes.”
Meanwhile, AI Doesn’t Care About Your Rate Drama
While everyone was obsessing over Fed Day, the AI boom just kept doing its thing. Enterprise AI demand? Still red-hot. AI earnings? Still crushing it. Companies reshaping their entire business around AI? Still happening at warp speed.
Here’s the beautiful part: AI growth doesn’t need rate cuts to exist. It just benefits massively from them. Think of it like this – AI is already the star athlete, and lower rates just gave it performance-enhancing drugs (the legal kind, obviously).
Why This Sets Up the Perfect Storm
You know what makes markets absolutely melt up? When two things happen at once: earnings growth and multiple expansion. AI is delivering the earnings growth in spades. And the Fed just removed the biggest obstacle to multiple expansion by stepping aside.
When rates stop rising, valuation ceilings lift. Risk tolerance improves. Money that’s been sitting on the sidelines goes “oh crap, I’m missing out” and jumps back into growth stocks.
This is exactly how Santa rallies are born – when decent policy meets undeniable growth trends.
The Bottom Line
The Fed didn’t promise the moon or completely throw caution to the wind. They did something way more bullish: they got out of the way. The hiking cycle is definitively over, Fed leadership is shifting dovish, and AI continues to compound underneath everything like a rising tide.
Santa just got clearance from the control tower, folks. And this year, instead of reindeer, he’s riding the AI wave straight to your portfolio.
Time to buckle up for the year-end rally.