The Federal Reserve cut interest rates by 25 basis points in their final meeting of 2024, but markets sold off after the central bank officials projected only two rate cuts for 2025. BMO Private Wealth chief market strategist Carol Schleif joined Morning Brief to analyze the implications. Schleif says during Federal Reserve Chair Jerome Powell’s press conference, "he tried repeatedly" to emphasize the economy’s strength. With the economy still robust, "inflation doesn’t come down as fast as they thought," Schleif adds. She explains that the Fed’s "slow and cautious approach" aims to "position themselves to absorb potential policy changes coming in." Looking ahead, she expects "pretty dramatically increased volatility" in early 2025. Schleif recommends investors maintain diversified portfolios with short-term fixed income (^TYX, ^TNX, ^FVX) to "act as ballast." Her preferred sectors include technology, industrials, biotechnology, and financials.
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