HE DOW JONES fell for 10 consecutive sessions till last Wednesday—this was the first time this has happened since 1974 (when it fell 11 sessions in a row). It bounced back on Thursday and Friday, and, to be sure, the total decline thus far has been modest (just under 5%), but the clouds on the horizon are ominous.
The decline began on December 5, after it had hit an all-time high super-enthusiastic about Donald Trump's victory. However, as it started to become clear that most of his economically imbecilic policies would actually be implemented, the market has become increasingly worried about the likely impact on inflation and then some.
The last sharp leg down (last Wednesday) came when the Fed, at its last meeting of 2024, did cut rates as expected, but shocked everyone with a sea change in its inflation and interest rate forecasts for 2025 and beyond. It is now projecting only two rate cuts in 2025, rather than the four that had been on their own cards just a few months ago (in September). Fed Chair Jerome Powell said, "For additional cuts, we're going to be looking for further progress on inflation."
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