Fed Update Clears the Runway for a Year-End Rally

Santa Claus just got clearance from the control tower.

The Federal Reserve has stepped out of the market’s way – and, in doing so, effectively gave stocks the green light to run into the year’s end.

Yes, it was a messy Fed Day. Jerome Powell delivered remarks that made bond traders wince and Twitter economists spiral. The market chopped around for a few hours as everyone debated whether “close to neutral” means cuts are ‘paused’… or ‘cancelled.’

But once you strip away the digital chatter and intraday noise, the message is crystal clear: the Fed is no longer an obstacle to higher equity prices.

And at the same time, the AI Boom is getting stronger and more undeniable by the week.

That combination – easing monetary policy plus accelerating technological growth – is rocket fuel for stocks going into the end of the year.

As I’ve been telling my coworkers… it’s time to Ho, Ho, Go.

Let’s break down why today’s Fed decision could spark a Santa Rally on Wall Street.

Fed Update: Not Perfect, But Bullish Enough for Markets

Going into Wednesday’s Fed meeting, markets had four boxes they wanted checked:

1. A rate cut
2. A more dovish economic outlook
3. A balanced official statement
4. Dovish remarks in the post-meeting presser

The central bank checked three out of four. And frankly, that’s a bigger win than most investors are willing to admit.

We got the quarter-point rate reduction.

We got a dovish-leaning Summary of Economic Projections. GDP forecasts nudged higher. Inflation forecasts edged lower. Future rate-cut expectations stayed alive. (And that combo screams ‘soft landing,’ no matter how many verbal caveats Powell adds.)

We also got a balanced statement that kept further easing on the table: 

“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

The only disappointment? Fed Board Chair Jerome Powell’s talking points.

In the press conference, he leaned hawkish, suggesting the Fed is close enough to neutral to justify waiting on more rate cuts. 

Cue the hand-wringing and arguments that the Fed just killed the rally.

Except… it didn’t.

Markets didn’t crash. Financial conditions didn’t tighten meaningfully. Risk assets didn’t unravel. Treasury yields didn’t spike. The dollar didn’t squeeze everything in sight.

Instead, everything kind of turned positive – the market’s way of saying, “We’re processing, not panicking; but this does look good.”

And there’s a good reason for that steadiness: the most important part of this Fed update wasn’t verbal at all.

The Fed’s Dot Plot Tells the Real Story

We noticed a detail within the Fed’s latest update that it seems most investors glossed over: the dot plot doesn’t agree with Powell.

The Fed is now openly divided into two camps:

• One led by Powell, seeking to hold rates steady
• Another led by Stephen Miran, hoping for further/larger cuts

That alone tells you uncertainty is high. And importantly, the cut-more camp’s influence is about to rise substantially.

As Powell approaches the end of his term as board chair, political and institutional gravity is shifting. National Economic Council Director Kevin Hassett – widely expected to replace Powell – is firmly in favor of more cuts.

So, when Powell says ‘we might pause,’ the markets know that lull likely has an expiration date.

That’s why we view Wednesday’s Fed decision as confirmation, not contradiction, of our long-held view that rates will go materially lower in 2026.

And equity markets don’t wait around politely for cuts to happen.

They front-run them.