Market Performance Post-Election and Policy Changes
Wall Street’s post-election rally has been further fueled by the Federal Reserve’s recent move to decrease interest rates, contributing to a positive outlook among investors. This shift coincides with Bitcoin reaching near all-time highs and Taiwanese chip giant TSMC experiencing a slowdown in sales growth.
Federal Reserve Policy Adjustments
In a significant move on Thursday, the Federal Reserve cut the benchmark overnight interest rate by 25 basis points, now resting at 4.50%-4.75%. This second consecutive rate reduction is part of the Fed’s efforts to normalize monetary policy amidst declining inflationary pressures.
Following the announcement, Fed Chair Jerome Powell hinted at a potential economic outperformance in the upcoming year, with inflation anticipated to approach the 2% target. Investors are now factoring in the likelihood of another rate cut next month, expecting a total reduction of 67 basis points through 2025. Speculation persists around Powell’s future, especially given his complicated relationship with President-elect Donald Trump, who appointed him in 2018 while criticizing the central bank’s strategies.
Market Response and Performance
In response to the Fed news, U.S. stock futures reacted positively, as traders interpreted the implications of the rate cut favorably. Major indices like the S&P 500 and the Dow Jones Industrial Average saw minor gains by early Friday, building on substantial post-election increases. After Trump’s win, the S&P 500 and DJIA surged roughly 4%, while the Nasdaq soared by an impressive 5.6% by the end of Thursday.
TSMC’s Growth Downturn
Amidst strong October sales, TSMC disclosed a noticeable slowdown in growth, with revenue hitting T$314.24 billion ($9.80 billion), marking a 29.2% year-over-year increase. However, this growth rate decreased from the nearly 40% reported in the prior month, raising concerns of weakening demand, especially in areas such as personal computing and consumer electronics. Despite this, TSMC remains hopeful about sustained demand from the AI sector, although tempered by softness in other markets.
Bitcoin’s Surge and Future Outlook
Bitcoin, the leading cryptocurrency, continued its upward trajectory on Friday, nearing its previous record highs following the election results. Trading at $75,852, a 1% increase from earlier, it was close to Thursday’s peak of $76,837. Investors are optimistic about the future regulatory environment under Trump’s administration, potentially enhancing Bitcoin’s investment appeal. Analyst Peter Brandt’s forecast suggests Bitcoin could reach $130,000 to $150,000 by late 2024, hinting at further gains for the cryptocurrency.
Oil Market Trends
Although crude oil prices dipped on Friday, they are poised for significant weekly gains due to OPEC+ producers postponing production increases and potential supply disruptions. WTI crude futures fell 1.2% to $71.50 a barrel, but the week is expected to conclude with around a 3% increase. Factors influencing prices include anticipated U.S. sanctions and market vigilance over Hurricane Rafael’s impact on production.
Conclusion and Implications
With the Federal Reserve’s recent rate adjustments and the ensuing positive market responses driving record highs in various asset classes, the economic outlook remains upbeat post-election. Nevertheless, TSMC’s growth slowdown highlights caution surrounding broader technology demand trends. Investors will need to remain attentive as the market adapts to these changes and the potential implications of the new administration’s policies going forward.
