Week of 01/22-01/26 Stock Market Muted at All-Time Highs, PCE Report

The S&P 500 index traded within a close range on Friday, but still managed to capture another positive week. Recently, the market has been gaining momentum as AI has taken lead once again for indexes to reach all-time highs. Another catalyst for this week was the core personal consumption expenditures (PCE) price index report coming in line with economists' expectations. This is one of the preferred metrics that the Federal Reserve considers when making adjustments to monetary policy. Investors are now betting strong on the FED cutting down interest rates, but the questions is how quickly will this happen since the economy seems to be doing well as it stands.

The FED, Interest Rates, and Soft Landing.

The Federal Reserve's management of interest rates for a soft landing or to prevent a market crash requires careful analysis of economic data and consideration of potential risks. Their decisions are based on a combination of economic indicators, market conditions, and assessments of future trends. However, it's worth noting that while the Federal Reserve has the ability to influence interest rates, they cannot control all economic variables. The effectiveness of their actions relies on a complex interplay of factors within the broader economic landscape. To achieve a soft landing, the Fed may increase interest rates gradually. This action aims to moderate economic growth by reducing consumer and business spending, curbing inflationary pressures, and preventing the formation of asset bubbles. By raising interest rates, the cost of borrowing increases, which can discourage excessive risk-taking and speculative investments. The objective is to achieve a sustainable and balanced level of economic expansion without leading to a sharp contraction.