Fed Pivot, Trump 2.0, SCOTUS Chevron Ruling & Earnings Broaden Stock Market Meltup

We've been predicting a broadening stock market meltup in the event that the Fed starts cutting the federal funds rate (FFR) as inflation moderates while economic growth remains solid. Last week's CPI and today's retail sales report confirm that's what's happening in the economy. Fed Chair Jerome Powell's dovish comments yesterday sealed the deal: As of this morning, markets were pricing in a 100% chance of a 25bps FFR cut in September, per the CME FedWatch Tool, up from a 70% chance a month ago. A total of five such cuts are expected over the next 12 months (chart).

Also fueling the meltup: The betting marketplace PredictIt is now showing 2:1 odds of former President Donald Trump winning in November, up from a coin-flip two months ago. For now, investors may be focusing on Trump's low tax-rates policy rather than his high tariff-rates policy. Trump is also likely to deregulate business with the help of the recent SCOTUS ruling that reduced the power of the government's regulatory agencies.