Inside Markets — Near-Term Outlook

Previews for next Wednesday’s FOMC meeting cite the potential for equity market downside in the event of a 25bp cut with hawkish forward guidance.  Equity market weakness through the first three weeks of November was largely attributed to a similar ‘hawkish rate cut’ at the October 29 meeting.  In our view, a repeat performance is unlikely given how expectations have changed.  Going into the 10/29 meeting, market-based probability for a December rate cut was above 85%, whereas today’s probability for a January rate cut is just ~31%.  Next week’s other catalysts including OpenAI’s new model launch and earnings from AVGO/ORCL have the potential to be more important drivers of near-term risk sentiment.