Panic swept across equity markets yesterday as the Federal Reserve (Fed) delivered a hawkish 0.25% interest rate cut, as expected. The real surprise came from upward revisions to inflation projections for next year and forecasts calling for fewer rate cuts. The updated Summary of Economic Projections (SEP) showed policymakers expect core Personal Consumption Expenditure (PCE) inflation to reach 2.5% next year, up from the 2.2% forecast in the September SEP. Furthermore, the median dot plot for the target rate moved up to 3.9% from 3.4%, suggesting Fed officials expect only two 0.25% rate cuts in 2025. Perhaps the real surprise came after Fed

Key Highlights

• Inflation data have been mixed, creating a ripe environment for investors to debate the perceived inflation trajectory.

• The Federal Reserve (Fed) will announce its rate decision later today, along with publishing a revised Summary of Economic Projections (SEP).

• We should expect the Fed to tamp down expectations for aggressive cuts in 2025 as the economy is humming.

• Both the sticky components of inflation and the flexible ones are running hotter than expected, putting upward pressure on rates. As of this morning, the 10-year Treasury yielded around 4.4%, up 80 basis points from i

As we enter the final weeks of 2024, one of the strongest alternative investment strategies this year has been equity market neutral investing. Through the end of November, the HFRI Equity Market Neutral Index has gained 10.2%, with a beta to the S&P 500 of only 0.04. As compared to the rest of the alternative investment sub-strategies, only the HFRI Equity Hedge Index has performed better, albeit this index has a consistently higher beta profile which is especially valuable when the broader market is up over 25% on the year.  

HFRI Sub-Strategy Returns Through 11/30/2024

The champagne popped yesterday after the Nasdaq Composite Index (CCMP) rallied 1.8% and surpassed the 20,000-point milestone for the first time. Strength from most of its mega-cap components underpinned yesterday’s rally, a common theme since the tech-heavy index bottomed at 10,213 back in 2022. Since then, the CCMP has added 96% (as of December 11), with NVIDIA (NVDA), Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Alphabet (GOOG/L) contributing to roughly two-thirds of the overall gain. (NVDA alone has added around 18%.)  

With the index marching to another new high yesterday, the n