Rate cuts are likely coming next year, but investors shouldn't bank on them saving the market
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Welcome back! We're fully in the holiday season, and I've got the perfect place. This year-round Christmas Airbnb is a dream destination for holiday fanatics.
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In today's big story, we're looking at why the rate cuts investors have been praying for might not be the godsend they imagined.
What's on deck:
- Markets: Here's how six HENRYs — high earners, not rich yet — handle their finances.
- Tech: Meet the women who made partner or higher this year at top venture capital firms.
- Business: Many Americans who left big cities during the pandemic have some regrets.
But first, this might not be the relief you're hoping for.
The big story
Patrick Semansky/AP Photo
Start cutting rates, they said.
It will be fun, they said.
The Federal Reserve's fight against inflation is taking hold, and that could mean central bankers finally lower rates next year. But rate cuts won't necessarily be the win markets are hoping for, Business Insider's Jennifer Sor writes.
Investors have been begging the Fed to consider cutting rates for the better part of a year. Even as banks failed, the Fed held firm on its war against sticky inflation.
A cooler-than-expected inflation report was enough for banks and market experts to declare an end to the Fed's tightening policy.
But minutes released from the Fed's most recent meeting didn't indicate cuts were imminent. The notes stated central bankers were comfortable keeping their monetary policy "restrictive" to clamp down on inflation.
Still, some interest rate traders are predicting rate cuts coming as soon as this March, according to CME's FedWatch Tool.
But it's important to remember why central bankers cut rates. It's not simply to let the market off the leash.
A rate cut is likely in response to a slowing economy, Jennifer writes. And if the Fed were to get as aggressive as UBS suggests it might — lowering rates nearly three percentage points by the end of 2024 — that could be because we're already experiencing a full-blown recession.
Another key piece of the economy facing headwinds complicates the case for rate cuts being a boon for investors.
The Fed has long touted its goal of a soft landing: lower inflation while not cratering the economy.
It's primarily made good on that promise. The process hasn't always been smooth (see: SVB, Big Tech layoffs, etc.), but the wheels haven't ultimately come off.
However, a key factor in keeping the economy afloat — consumers — is losing steam.
Retail giants Walmart and Target noted during recent earnings calls they were seeing consumer spending dip, Business Insider's Dominick Reuter writes. It's another sign that US consumers have blown through most of the savings they accumulated during the pandemic and are wracking up debt.
And now the pullback comes on the cusp of the biggest season for consumer spending: the holidays.
So yes, rates will ultimately be a win for the market. But it'll take plenty of sacrifice to get there.
Your Monday headline catchup
A quick recap of the top news from over the weekend:
- George Santos says he'll treat expulsion as a 'badge of honor' as he claims his colleagues are drunkenly having sex with lobbyists 'every night'
- 'We're not here to talk about fights': Drama in Congress is starting to spill over
- Trump's pardoning of a Kushner-linked drug smuggler undercut a larger DOJ investigation
3 things in markets
Miles Goodloe/Domenic Boresta/Robert Oszust Jr.
How HENRYs save and invest. High earners, not rich yet have plenty of financial concerns despite making over $100,000. Six HENRYs from across the country detailed their approach to saving — with some socking away as much as 70% of their income — and how they approach short-term investing.
Hedge funds come up short, literally. Funds have lost roughly $43 billion trying to short the market in recent days, according to the Financial Times. Their bet against stocks comes as the S&P 500 is on track for its best month since July 2022.
You know what they say about one person's trash... Junk bonds have become a hot investment with rising optimism that the Fed is done raising rates. In the month leading up to November 20, bond funds saw inflows of more than $16 billion, the vast majority of which went to junk bonds.
3 things in tech
Amazon/Insider
Amazon is rolling out some big Cyber Monday deals. Some of the best discounts right now include savings on Echo speakers, PS5 bundles, and kitchen appliances. Our deal hunters have organized discounts by product category to make them easier for you to browse.
These 20 women in venture capital made partner or higher this year. In an overwhelmingly male industry, these women claimed a seat at the table this year. The list includes Khosla Ventures' Alice Brooks and Founders Fund's Jennifer Campbell.
Meet the founder of the Failure Museum. Sean Jacobsohn started collecting objects from failed businesses a year ago. Since then, he's collected more than 500 items that sit in glass display cases in his office. Plus, Jacobsohn said it helped him understand why businesses and startups fail.
3 things in business
Chelsea Jia Feng/BI
Americans ditched big cities during the pandemic. Many are now regretting it. They're further away from the communities and social network they spent years cultivating. Some have struggled to assimilate to their new communities. And many feel cut off from their identities, hobbies, and the friends they left behind.
Bet your career on these five trends. Generative AI is fueling a lot of job changes, but it's not the only factor. Legislation, for example, is fostering a boom in infrastructure roles. And creators are a $250 billion industry.
The latest workplace request from Gen Z: legal services. More young workers say they want legal help as a workplace benefit, according to a new survey. This desire comes as more Gen Zers are stressed about finances — and they expect to use the services within a year.
In other news
People are leaving Texas over rising costs, partisan politics, and a sense of disenchantment.
I worked in HR at Amazon and put people on Pivot. Then I got put on a PIP myself.
What's happening today
It's Cyber Monday. Many online companies have special promotions and discounts on their products.
The Gotham Awards for independent filmmaking is tonight. Honorees for the 33rd annual celebration include Bradley Cooper, Ben Affleck, and Greta Gerwig.
Bill, Bill, Bill, Bill — happy birthday to Bill Nye the Science Guy. Manolo Blahnik, Jimi Hendrix, Steve Bannon, and Bruce Lee were also born on this day.
The Insider Today team: Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.