Yardeni Research advised investors to brace for “intense volatility” in January, anticipating turbulent market movements as Donald Trump prepares to resume the presidency. According to the firm, this volatility, driven by potential political changes under Trump 2.0, could create new buying opportunities.
The stock market fell after the Federal Open Market Committee's (FOMC) Summary of Economic Projections (SEP) was released on Wednesday. The document revised expectations for interest rate cuts in 2025, reducing them to two from four cuts compared to September's projections.
On Friday, however, the market rallied after two Federal Reserve officials suggested the latest inflation report could justify future interest rate cuts.
Chicago Fed President Austan Goolsbee told CNBC that over the next year or year and a half, inflation could “come down significantly,” noting that the magnitude of the drop is more important than the exact timing.
John Williams, president of the New York Fed, has made similar statements, indicating that he expects further interest rate cuts from the monetary authority.
The recovery was also boosted by the approval of a budget bill in the House of Representatives, with the Senate actively working to secure enough votes for its approval.
“Did PCED inflation in November justify the reversal in market sentiment about interest rate cuts in 2025? Maybe,” Yardeni pointed out.
The overall personal consumption expenditure (PCED) price index posted an annualized increase of just 1.5 percent from the previous month, down from the 2.4 percent annual rate.