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For years, Federal Reserve announcements dominated headlines and drove market moves. But today, the Fed is no longer the star of the show.
As we approach the Fed’s next rate decision at 2 p.m. ET this Wednesday, the market seems more indifferent than ever.
Take last week’s data releases as an example. CPI met expectations while the PPI came in higher than anticipated. Both reports typically carry significant weight, yet the S&P 500 (SPY) barely reacted after an initial dip.
The market dipped premarket on the PPI miss, only to recover within an hour of the open and trade sideways for the remainder of the session. Without context, you wouldn’t know these reports were released by looking at the charts.
This muted response highlights a trend that’s been building since September — or even earlier. The market has grown increasingly desensitized to CPI, PPI and Fed decisions.
As long as the Fed’s moves align with expectations, the broader market seems content to ignore them.
Consider the CME FedWatch Tool, which currently shows a 91.1% probability of a 25-basis point rate cut on Wednesday. Just a week ago, those odds were in the 85% range, reflecting growing certainty that the Fed will deliver the cut.
If Powell sticks to the script and executes the expected move, the market will likely continue its low-volatility chop or float modestly higher into year-end.
However, a surprise — such as pausing rate cuts — could trigger a sell-off. Even so, it’s an unlikely scenario given Powell’s history. He famously maintained that inflation was “transitory” for far too long, only to admit later that it wasn’t.
After that blunder, Powell seems unlikely to risk another misstep. The Fed has rarely paused between rate cuts or hikes, and there’s no reason to expect a deviation from that playbook now.
This reduced market sensitivity to the Fed has traders shifting their attention elsewhere. Tariffs, geopolitical developments, and sector-specific trends are now the bigger drivers. It’s similar to last year’s fashion — once it’s out of style, people stop talking about it.
For traders, this shift requires a fresh perspective. While the Fed remains an important backdrop, it’s no longer the centerpiece of market action. Sectors like Health Care (XLV), which is currently showing notable movement, offer more immediate opportunities than waiting on Powell to confirm what the market already expects.
As Wednesday’s decision nears, don’t expect fireworks unless the Fed delivers a major surprise.
The days of the market hanging on every word from Powell are fading fast. The Fed’s influence, much like last year’s trends, is becoming a thing of the past. It’s time to focus on where the real action is — because the market certainly has.
Kane Shieh
Kane Shieh Trading
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