#federal-reserve

#federal-reserve

The financial services company, in a note to investors this week, said that it believes the AI story is just getting started - and the investments that seem huge today will be dwarfed by the benefits AI will deliver. Long term, the investment bank says that AI adoption could add $20 trillion to the U.S. economy. AI, according to Goldman Sachs, is already delivering those gains in productivity when deployed right.

The markets are ending the week on a low note as the global selloff continued in Asia and Europe this morning, prompted by rising uncertainty stemming from the U.S. economy. Doubts about a much-anticipated December interest rate cut from the Fed are mounting, with the likely outcome obscured by patchy data after Washington's government shutdown. Wall Street was bumpy yesterday. The S&P 500 and Dow Jones posted contractions of more than 1.6%, while the Nasdaq Composite fell by 2.3%.

"If you ask me, could [the absence of data] affect the December meeting?" Powell said last week in his news conference. "I'm not saying it's going to, but, yeah, you could imagine that." "What do you do if you're driving in the fog? You slow down," he said. "I don't know how that's going to play into things. ... But there's a possibility that it would make sense to be more cautious about moving. ... I'm not committing to that; I'm just saying it's certainly a possibility that you would say, 'We really can't see, so let's slow down.'"

Stocks are opening lower on Wall Street, pulled down by losses in the same big tech companies that have been the main drivers of the market's rally so far this year. The S&P 500 slid 1.2% in the early going Tuesday. The Dow Jones Industrial Average fell 431 points, or 0.8%. The Nasdaq composite sank 1.7%. Palantir Technologies, which had more than doubled so far this year, fell 10% despite reporting results that beat analysts' forecasts. Nvidia also reversed course, falling 2.8%.

The S&P 500 closed October with three consecutive weeks of gains, temporarily setting a record high around 6,920 points before slightly retreating to the 6,840 area by the end of the week. This upward momentum reflects a combination of expectations for Federal Reserve rate cuts, stronger-than-expected corporate earnings, and investors' "risk-on" sentiment during the year-end season. However, this optimism also comes with clear warnings, as valuations are now significantly higher than long-term averages, while the macroeconomic foundation still contains various uncertainties.

"This framework potentially includes a delay of China's rare earths restrictions that caused the latest trade flare-up, a spiking of Trump's threatened 100% tariffs on China that were to start Nov. 1, and a resumption of Chinese purchases of soybeans. The agreement may include a resolution of the TikTok dispute with the U.S., getting a deal for the U.S. version of the social video app," they added.

A combination of budget jitters and rising bets in favour of a December rate cut from the Bank of England have kept sterling firmly on the back foot so far this week, with the pound slumping towards the 1.31 level on the dollar yesterday, and to its lowest level on the euro since May 2023.

Our house forecast is that they take the MBS paydowns, which are roughly about $16 billion a month, and reinvest those into Treasury bills, said Jeana Curro, managing director and head of agency MBS research at Bank of America. That aligns with a lot of the rhetoric from this Fed. They've said they ideally want to hold a Treasury-only portfolio.