Going into yesterday’s Federal Open Market Committee (FOMC) decision, it was clear most members of the Federal Reserve who voted for that jumbo rate cut, followed by another cut, had buyer’s remorse (or survivor guilt). 

There was a lot of chatter this month, essentially mea culpa and sounds of caution.

The question was whether or not Powell would follow the pattern.

To a degree, that’s precisely what he did, but it's clear to me that Powell wants to be accommodative.

Hawkish Language

Changes in the FOMC statement were seen as hawkish (I’m never sure how to read these things), but Jay Powell pushed back on that narrative.

By the time the question-and-answer period concluded, it felt anticlimactic. As the ten year bond yield (TNX) drifts lower, the stock market should be fine.

Rate Cut Assumptions

 

Rate Cut Assumptions	Before FOMC	After FOMC
March	31%	18%
May	52%	42%
June	73%	75%

Slippery Session

Parts of the Artificial Intelliegnce (AI) story rebounded, lifting Communication Services (XLC) and Utilities (XLU).

Mega Cap Roulette

“Mag Seven” reports mixed results after the close:

• Meta (META) popped on Artificial Intelligence (AI) & Ad Sales.
• Microsoft’s (MSFT) Azure disappointment.
• Tesla (TSLA) missed the top and bottom lines, but Musk said these words: “launching unsupervised full self-driving as a paid service” in Austin, Texas, in June.

These stocks bounced around a lot, but they are not a monolith, which is good news.

Underscored by Bespoke Research (below).

Today’s Session
The market is refocusing on the future and the companies that will dominate, as the artificial intelligence trade expands beyond picks and shovels.

Nobody laid it on thicker than Elon Musk.

Doubling is not even enough. We made many critical investments in 2024 in manufacturing, AI and robotics that will bear immense fruit in the future, immense. Like it's, in fact, to such a scale that it is difficult to comprehend. And I've said this before, and I'll stand by it.

I see a path. I'm not saying it's an easy path, but I see a path of Tesla being the most valuable company in the world by far. Not even close, like maybe several times more than -- I mean, there is a path where Tesla is worth more than the next top five companies combined. There's a path to that.

-Elon Musk

Investors like and believe what they are hearing.

Interestingly, retail investors pulled back on their optimism about the market as bearishness is above the historical average.

Some think that’s a buy signal. I think the current environment (earnings season, DeepSeek issue, and massive media efforts to derail the new administration) is cause for near-term concern.

I’m still pumped overall and urge everyone to remain opportunistic.

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