The Federal Reserve’s first meeting of 2025 arrives at a crucial juncture, with the S&P 500 at record highs and investors keenly watching for signals about future rate cuts. After December’s meeting dampened rate cut expectations, improved inflation data has fueled a market rebound, with the S&P 500 gaining 4% in January.
While the Fed is expected to hold rates steady at 4.25-4.5%, market participants are particularly focused on conditions that could trigger resumed rate cuts, with futures markets pricing in roughly two cuts by year-end. The meeting’s significance is amplified by Trump’s return to office, as his calls for immediate rate cuts and potential tariff policies could influence the Fed’s inflation outlook.
Additionally, the market faces another test as major tech companies, including Apple, Microsoft, Meta, and Tesla, prepare to release earnings reports, with the “Magnificent Seven” stocks trading at significantly higher valuations than the broader market.