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With election results in, the market is finally showing some direction — but we’re not entirely out of the woods yet. Today’s 2 p.m. ET FOMC rate cut decision will be crucial.
The market’s betting on a modest 25-basis-point cut, with a slim chance of a 50-point cut, which could provide more breathing room for growth. But let’s not forget: Any cut is still inflationary. And while the market might have priced in a smaller cut, the actual reaction could surprise us, especially with inflation still a threat.
Now, let’s talk about what this all means for fund managers and how it might affect overall market movement.
There’s a common belief that most fund managers are laser-focused on beating the S&P 500. But it’s more nuanced than that.
Many managers aren’t even trying to outpace the S&P 500 — their benchmarks are entirely different. Take managers working with retirement fund allocations from companies like Apple (AAPL), Google parent Alphabet (GOOG; GOOGL), or Disney (DIS)…
They’re not aiming to make huge returns.
Their goal is to protect capital and offer a small return, so they might benchmark to something safer, like Treasuries plus a modest margin, not the S&P 500. For these managers, safety and liquidity are top priorities.
But then there are the discretionary managers — those with more freedom to allocate funds.
These managers are more likely to align with the S&P 500 as a benchmark, especially now, with uncertainty reducing post-election. If the market shifts upward, their portfolios need to follow suit or they risk underperforming the broader index.
That’s why we’re likely to see more capital flowing into equities in the coming days.
Managers who’ve stayed on the sidelines — waiting out the election volatility — now have limited time to deploy their funds before year-end. We’re already seeing some evidence, with volume in the S&P 500 surging compared to the average.
That’s not to say this is a green light to jump in blindly.
With the FOMC decision today, we could see some short-term volatility. Any move by the Fed — even a modest cut — will reverberate across sectors. Defensive plays like bonds have been losing ground as rates rise, and rate-sensitive sectors like real estate are also feeling the pressure.
But this market is more than just about direction — it’s about timing and patience.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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