Weekly Market Wrap: Fed Cuts, Markets Soar, and Political Tensions Rise

Another week in the markets, and what a week it’s been. We’ve seen the Federal Reserve finally make its move, stocks hitting fresh all-time highs, and a fair bit of political drama on both sides of the Atlantic. Let’s break it all down.

US Markets: A Record-Breaking Week

It was a week for the bulls in the US, with the Dow Jones and S&P 500 both closing at record highs. The Dow climbed to 46,315.27, and the S&P 500 reached 6,664.36. The Nasdaq also had a strong showing, closing at 24,631.48. For the week, the S&P 500 was up 1.2%, the Dow gained 1.0%, and the Nasdaq surged 2.2%. This rally was primarily fueled by the Federal Reserve's decision to cut its benchmark interest rate by 25 basis points, the first cut since December of last year. While Fed Chair Jerome Powell described it as a “risk management cut,” the markets took it as a green light to continue their upward climb. The CBOE Volatility Index (VIX), often called the market's fear gauge,” reflected this renewed confidence, dropping from the mid-16s earlier in the week to around 15.45.

UK Markets: A More Subdued Picture

Across the pond, the FTSE 100 had a more muted week, closing down 0.7% at 9,216. The Bank of England, in contrast to the Fed, held its nerve and maintained the Bank Rate at 4%. The Monetary Policy Committee was split 7-2 on the decision, with the dissenters favouring a cut. This divergence in monetary policy between the US and the UK is something I’m watching very closely. While the BoE is holding for now, the pressure to follow the Fed’s lead will undoubtedly grow if we see any further signs of economic weakness.

Currencies, Commodities, and More

In the currency markets, the pound slipped against the dollar, with GBP/USD trading around 1.3460. The dollar’s strength, bolstered by the Fed’s actions, is a key factor here.

Gold continued its impressive run, marking its fifth consecutive weekly gain. The yellow metal is currently trading around $3,684.71, and with the Fed in easing mode, the path of least resistance seems to be higher.

Oil prices, on the other hand, were relatively flat for the week. Brent crude hovered around $62 a barrel, as concerns about global demand seem to be offsetting any bullish sentiment from the broader market rally.

The Political Angle

Of course, we can’t ignore the political landscape. In the US, the Trump administration’s aggressive tariff policies continue to be a significant source of uncertainty. With tariffs of up to 35% on goods from key trading partners, the risk of a full-blown trade war remains very real. The Supreme Court has even agreed to weigh in on the legality of these tariffs, which adds another layer of complexity to the situation. Additionally, we’re witnessing a growing battle over government funding, with Democrats threatening a shutdown. This kind of political brinkmanship is never good for market stability.

Here in the UK, the Bank of England’s decision to hold rates was the big news of the week. But with inflation still running at 3.8%, well above the 2% target, the MPC is in a tough spot. They need to balance the risk of inflation with the need to support a subdued economy. It’s a delicate balancing act, and one that they’ll have to manage carefully in the months ahead.

My Trading Focus This Week

This week, I'm particularly focused on two key opportunities that the current market environment is presenting.

Gold Intraday Buy Positions: With gold marking its fifth consecutive weekly gain and the Fed now in easing mode, the technical and fundamental picture for gold looks compelling. The Fed's 25 basis point cut has weakened the dollar's appeal as a store of value, and with Jerome Powell signalling this is just the beginning of their easing cycle, gold's appeal as an inflation hedge and safe haven asset is only growing stronger. The fact that we're seeing consistent weekly gains despite some intraday volatility tells me the underlying trend is solid. I'm looking for intraday dips to add to long positions, particularly around key support levels.

FTSE 100 Intraday Buys: While the FTSE had a subdued week, down 0.7%, I see this as creating an opportunity rather than a concern. The divergence between the Bank of England holding rates at 4% while the Fed cuts creates an interesting dynamic. UK assets are looking increasingly attractive on a relative basis, especially with the pound weakening against the dollar. The mining stocks within the FTSE showed real strength this week, with Fresnillo up 5.1% and Endeavour gaining 5%. This sector rotation into commodities and UK equities could accelerate if we see continued Fed easing. I'm watching for intraday pullbacks in the FTSE to establish long positions, particularly targeting the 9,200 level as a key support zone.

Join Me for Live Trading in January

Speaking of opportunities, I'm excited to announce my 5-day intensive trading retreat this January. This isn't your typical seminar – it's a hands-on, live trading experience where you'll be right beside me as I execute real trades in real market conditions. Over five intensive days, you'll learn my exact strategies, risk management techniques, and how I read market sentiment to identify high-probability setups.

We'll cover everything from technical analysis to fundamental drivers and market psychology. You'll see firsthand how I approach trades, such as the gold and FTSE positions I'm focusing on this week, and you'll understand the reasoning behind every decision. This is your chance to accelerate your trading education and learn from someone who's been consistently profitable in these markets for years.

Spaces are extremely limited as I want to keep the group small for maximum interaction and personalised attention. If you're serious about taking your trading to the next level, I encourage you to apply now at https://sl448647.typeform.com/livetrading.

My Final Thoughts

So, what does this all mean for you? Well, the Fed's rate cut is clearly a positive for the markets, and we could see this rally continue in the short term. However, the political risks, both in the US and the UK, are significant. A trade war, a government shutdown, or a policy misstep from a central bank could all derail the current bullish sentiment.

The opportunities I'm seeing in gold and the FTSE this week are perfect examples of how to navigate this environment – finding assets that benefit from the current monetary policy divergence while managing the inherent risks. As always, I'll be keeping a close eye on all of these developments and will be sure to keep you updated. Stay sharp, and happy trading.

All the best

Samuel Leach

www.samuelandcotrading.com