Jim Caron on the Market Selloff and the Fed's Historic Adjustment
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What is the main topic discussed in this episode?
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Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe Wisenthal.
Joe, look at the screen. That's a that's painful.
So for if you're uh just tuning in right now, we are recording this. It is 421 PM at 12 on 1218, 2024. So we just had a Fed decision. They cut rates, but you know, they call it a hawkish cut because various reasons, which we'll get into, and uh stocks got clobbered. Uh SP ended down 2.95%. Again, that we're doing this uh we're recording this after the bell on Wednesday.
Yeah, uh I guess maybe we fix that breadth problem at a minimum. Um, but yeah, everything is red. Bonds down two as well. Um, which is kind of interesting to see them go in in the same direction. All of which means we need to talk about markets. It's been a while since we've had like a chunky market discussion.
Uh it has been a while since we've just talked about markets. I mean we c sort of talked about them we did an episode with the uh top strategist at Goldman recently. But what I would say the sort of defining aspect of markets right now and you hinted at them is Is how narrow this, you know, we've had extraordinary gains in equity markets in 2024, but the gains have become incredibly narrow. So basically, if you looked outside of anything that isn't AI, chips, crypto, and quantum computing, things have been sputtering for a while. A lot was really riding on a handful of sort of hot momentum names. You sort of wondered how long that could last. And again, if you look at the Nasdaq as of right now, up twenty nine percent on the year.
Dow Jones, as we're talking about, ten straight days, longest sell-off since nineteen seventy four. That's a
crazy stat.
I know it's a great stat, isn't it? Only up twelve percent for the year.
It's one of those days where we get to trot out all these superlatives because everything's moving all at once. But we need to talk about why this is happening, how long it might last, and what it means for next year, obviously. And we do have the perfect guest to be talking to. We are speaking with Jim Caron, the Chief Investment Officer of the Multi-asset Portfolio Solutions Group at Morgan Stanley Investment Management. It's quite a title. Jim, welcome to the show.
Thank you. Thank you for having me.
So let's start with the basics. You know, Joe described it as a a sort of hawkish cut. Was that your takeaway as well?
Well, yeah, I mean I would say that it was even more than that. Um so for example, we have to put this into context, right? So today, December, the Fed meeting, we have to go back to the September Fed meeting. That's when the Fed basically laid out the plan that they were on a mission to cut interest rates, that the terminal policy rate, that they were on a mission to get down towards a three percent fun Fed funds rate, possibly Yeah. Today they reverse course to an extent that they actually, if when we look at their dot plots, that they actually raise the dots by about 50 basis points across the board. Let me say that again. They raise the dots by 50 basis points across the board. And the dots are really just an estimation of what many of the of the Fed governors are thinking, the voting members on the Fed are actually thinking about policy.
Going into the future. So instead of having about four or five rate cuts in 2025, now it's closer to like two rate cuts in 2025. So they've cut that in half. This is probably, I've been doing this for 32 years. This is probably. One of the sharpest reversals, or I should say adjustments, not really a re reversal, but an adjustment.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–4:34
2
What caused the market’s sharp sell‑off after the Fed’s rate‑cut decision?
4:34–8:34
3
Why is equity performance this year so concentrated in a few “Magnificent Seven” stocks?
8:34–11:39
4
What risks does concentration in a handful of tech names create for investors?
11:39–13:12
5
How did the Fed’s 2024 meeting change the outlook for future rate cuts?
13:12–29:08
Speakers
6 identifiedMore from Odd Lots
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