Stock market sinks as Federal Reserve signals fewer rate cuts in 2025

In the United States, economic conditions are showing signs of strength, with data indicating that the economy grew faster than anticipated in the third quarter. Jobless claims also decreased more than expected, leading to speculation about the Federal Reserve's approach to monetary policy. On December 19, 2024, the Federal Reserve cut rates by 25 basis points; however, a cautious tone was set regarding future rate cuts, suggesting only two may occur in 2025, down from the four cuts previously projected. This shift has implications for markets, particularly impacting precious metals like gold, which has been on a decline as investors reassess risk factors. In the global landscape, many stock markets reflect the sentiment of uncertainty, with shares mostly lower as traders await crucial U.S. personal spending data. Major indexes like the S&P 500 experienced slight dips, reflecting a cautious mood among investors following the Federal Reserve's revised outlook. International markets also reacted, with British and European stocks showing losses, while some Asian markets fluctuated. China's decision to maintain its lending rates is seen as an effort to bolster a slowing economy amidst a backdrop of weakened currency and external pressures. The atmosphere surrounding these developments is influenced by broader geopolitical factors, particularly with the potential return of former President Donald Trump in the U.S. next year, which may create uncertainty regarding trade policy and economic strategy moving forward. Investors are now poised to evaluate upcoming data, particularly the core Personal Consumption Expenditures (PCE) report, which is a key metric for gauging inflation and economic health based on consumer spending. Watchers of the market are closely interpreting these economic indicators as they look for signs of recovery or further contraction. Overall, the economic trajectory remains precarious, with the Federal Reserve's decision to hint at slower cuts signaling to markets that they may need to recalibrate expectations for economic growth and inflation control. While the U.S. economy shows signs of resilience, the implications of less aggressive monetary easing could lead to increased volatility in financial markets as traders seek clarity on the Federal Reserve's future policy direction.