NEW YORK - A banner year for U.S. stocks gets one of its last big tests with the coming week’s Federal Reserve meeting, as investors await the central bank's guidance on interest rate cuts.index breached 20,000 for the first time ever in the past week, another milestone for equities in a year during which the tech-heavy index has gained 32% while the
"Anything that results in an expectation that maybe the Fed moves even more slowly from here than investors were expecting could create a little bit of downside for stocks," said Jim Baird, chief investment officer with Plante Moran Financial Advisors. But the path for rates next year is less certain. Fed fund futures are implying the rate will be at 3.8% by December of next year, down from the current level of 4.5%-4.75%, according to LSEG data. That is about 100 basis points higher than what was priced in September.
Another factor that could make Fed officials more cautious about future cuts is the presidential election of Donald Trump, whose pro-growth economic policies and favoring of tariffs are causing concerns about stronger inflation next year.) said they expect a"hawkish cut," with the central bank likely to"open the door for a pause in further cuts of undefined length."
Still, analysts say the market's momentum favors more gains into year end, while sentiment among investors in surveys remains bullish - though some market technicals suggest the rally in stocks may have grown stretched.