Stocks Rally as Fed Cuts Rates; Tech and Crypto Lead Market Gains
Stocks Rally as Fed Cuts Rates; Tech and Crypto Lead Market Gains
By:JJ Kinahan
Investors Eye New Opportunities in Crypto and Private Prisons
- The stock rally is continuing with S&P 500 gains; tech stocks are surging as the Fed cuts interest rates.
- Powell confirms monetary policy will focus on economic conditions—markets anticipate rising consumer impact from higher rates.
- Decreased volatility boosts market optimism. Crypto and private prison stocks are surging amid anticipated regulatory changes.
The stock rally that began earlier in the week continued today, with the S&P 500 adding 0.7% and tech stocks increasing by 1.5%. The Russell 2000 dropped slightly by 0.5%, while the Dow Jones Industrial Average remained flat.
Meanwhile, the Federal Reserve cut interest rates by 0.25%, as anticipated. Fed Chair Jerome Powell emphasized that monetary policy will be based on economic conditions and not fiscal policy. Asked about his future under President-elect Donald Trump, Powell said he intends to finish his term, noting a president cannot legally dismiss him.
Rising long-term interest rates
Rising interst rates remain a key concern, especially as the yield curve steepens. Although short-term rates have declined, long-term rates are climbing, which could affect consumer borrowing and spending.
The 30-year mortgage rate has risen to 6.92%, which may discourage consumers. Long-term rate projections have also shifted, with Citi now predicting a bottom rate of 3.6% by 2026, up from a previous expectation of 2.8%.
Market volatility has dropped sharply, with the VIX now under 15, suggesting reduced uncertainty following the election. This calmer environment has investors looking for new opportunities.
Favorable circumstances ahead
Bitcoin has surged above $75,000, positioning crypto assets as notable winners.
Prison companies, such as The GEO Group (GEO), have also seen significant gains, likely because of anticipated regulatory changes.
More mergers and acquisitions are expected, particularly in the media sector. Companies like Alphabet and Amazon may avoid forced breakups but could opt for voluntary spinoffs to unlock value.
For now, markets appear optimistic. As we head into the weekend, any profit-taking could present buying opportunities, while strong positions might signal continued bullish sentiment. Investors are encouraged to remain focused on long-term goals.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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