Jay Powell’s unspoken deal with the market was simple: inflation dips back below historical long-term “average” (3%), rates come down. Inflation at 2.9% lived up to its end of the deal. Now Powell and company need to step up or lose credibility.

We’re targeting little cuts (0.25%) every Fed meeting for the next YEAR. That can take overnight rates down about 2 full points by next summer. That’s going to feel amazing.

As a rule of thumb, target about 3% upside for the S&P 500 with every 0.25% cut. That’s just how the multiple expansion works. The higher rates go, the less investors care to pay for every dollar of earnings. But as rates drop, the market can support richer valuations without missing a beat.

The challenge here is that a lot of multiple expansion is already baked into the market. We estimate the S&P 500 has already priced in 2-3 cuts, which means stocks are already captured all the Fed love they’re likely to get until early 2025.

“Priced for perfection” is usually a recipe for volatility when reality gets in the way. Moral: don’t sell rate cuts but don’t be too quick to buy. Business as usual. No crash scenario but no reason to load the truck either.

Meanwhile, we’re looking for big EPS expansion starting in Q4. Those numbers don’t come out until January. That’s when the bulls can strut their stuff. Everything until then will be tentative.

And forget political clouds. Options markets suggest the market is resigned to another 80 days of electoral noise and the end result will be . . . business as usual.

After the election, a little relief but again, late 2024 is more about the Fed cycle than the White House.

Are we in the throes of a serious recession? Nothing dramatic. Even if the economy is going through a slight slowdown (think mid-2022, anybody remember that??) it will feel much better without inflation making everything hotter and harder.

All in all, there’s no sell signal here. Maybe not much of a buy signal until we get close to the January earnings cycle . . . but that’s just for the market as a whole. Add it all up, the next few months belong to active traders.

We’ve been extremely active. My 2-Day Traders just scored their biggest win in history: a bet against volatility that unleashed 270% in profit in a span of two weeks.

It really didn’t require a lot of insight. After the Japanese market crashed and the VIX spiked to levels we haven’t seen since March 2020, I knew the market couldn’t stay that unsettled for long.

A win like that changes the game. It means that even if we were to completely strike out on three other trades, we basically break even.

And we’re doing a lot better than complete strikeouts. But you need to trade in order to achieve these results. That’s why we do it.