After Fed Scare, Will The Grinch Ruin The Santa Rally? | Lance Roberts & Adam Taggart

**Lance Roberts** (0:00)
Markets are very oversold now. You worked off a lot of that excess kind of exuberance in the short term. A lot of that negative breath is now going to be in a position to start recovering. So you've actually got a very decent setup now, which is kind of what we talked about two weeks ago, is that, you know, we're going to have that period of distribution that'll set the market up for that year-end rally.

**Adam Taggart** (0:27)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. Welcoming you back here at the end of the week for another weekly Market Recap, featuring my good friend, the bad banana with a greasy black peel portfolio manager, Lance Roberts. Lance, how are you doing? I'm doing fine, how are you today? Good, I had a totally different adjective set up, but when you led here with the Grinch behind you, I had to go with an appropriate describer.

**Lance Roberts** (0:54)
Exactly. Well, I mean, everybody's all upset right now this week because of the Fed. So Jerome Powell is now my Grinch story for the week.

**Adam Taggart** (1:04)
So we'll see. The market was interesting. The market, unless you were sleeping under a rock this week, the Federal Reserve came out, did pretty much exactly what it promised to do, but then kind of spooked the market by showing its future dot plot, which showed that the Fed now expects to be reducing the Federal Funds policy rate at a slower rate than the market was hoping for. Market sold off pretty hard after the news on Wednesday. Yesterday, markets rallied, but then throughout the day, momentum waned and it actually closed red. Now the market's up pretty big. The morning we're talking here, Lance, on Friday, we'll see where it ends up closing. But yeah, that's the big question. Did Jerome Powell just turn the Santa Claus rally into the Grinch rally, or is the market just getting over a little bit of heartburn from the change in expectation and everything's going to be fine?

**Lance Roberts** (2:04)
Actually, all that narrative about change in expectation, all that has had nothing to do with the market sell off on Friday.

**Adam Taggart** (2:12)
You mean Wednesday, right?

**Lance Roberts** (2:14)
I'm sorry, on Wednesday, correct. On Wednesday, because if you paid attention, we've been writing about this all week in our daily market commentaries is that you had the worst breath in the market that we've seen in months, and that's been going on for the last couple of weeks. You also had very negative sentiment, starting to pick up on different technical fronts as well. So despite the fact that the market was hanging in there, we had talked about a couple of weeks ago here on the show that we're going into that portfolio rebalancing period. And last week and this week in particular, is when all the mutual funds do their portfolio rebalancing, do their annual distributions. And so it's just that negative bias to the market was already there. It just needed a little bit of a push, so to speak, to get the sellers to go ahead and sell. And we saw it across all assets. So anything that had a gain this year got sold, anything that had a loss got sold. And that's why on Wednesday, if you really think about it, Adam, if it was because the Fed changed their dot plot because they were expecting inflation to be more sticky, then why did gold dump by almost 2.5% on Friday, on Wednesday? Right? Gold should have gone, that should have been a boomer day for gold on Wednesday if it was really a statement by the Fed that inflation is sticky, inflation is going higher. That wasn't the case. This was simply just a function that a lot of portfolio managers, just like us, were waiting to see what the Fed was going to do on Wednesday. And then we started buying on Thursday. So we were just waiting to get through that Fed meeting along with everybody else to see if there was any kind of surprise that came out of it. And there really wasn't. The Federal Reserve has been talking about, hey, they're going to cut rates, they're going to as anticipated, and they're going to keep watching the data. And while they did shift the dot plot, and again, that dot plot is about as meaningless as anything that comes along because it's subject to the whims of change of data from one meeting to the next. But if you look at the longer run predictions, going out to 26-27, they're at 1.8% economic growth. That's down from 2 last year. And if you take an inflation rates are at 2, expectations for Fed funds are 2, nothing changed. So it was just the short-term pace that changed a bit, but the long-term expectations are exactly the same.