The last few days have been interesting.
Powell allegedly was expected to make people believe "rate cuts" are coming. Indeed, some of the callers on the various media channels are now claiming six rate cuts will come next year.
I'll take the under on that: No they won't because the only way that can happen is if Congress balances the budget, which it has shown zero inclination to do.
I don't expect there will be any "rate cuts" next year; if anything short rates are going higher, not lower. Why? Because until Congress cuts it out the only other alternative is that the roughly 8% inflation created by Congressional deficit spending, none of which has any source of absorption anymore outside the country (the slacking of trade growth and US/EU sanctions imposition due to the Ukraine mess destroyed that and it isn't coming back) is going to show up in inflation and that means real rates are still negative.
A 5% interest rate in an 8% inflation economy is a real rate of -3%. Period. That is, not a thing has changed in terms of the actual tenor of borrowing rates despite the fact that Americans in general are getting screwed and that cannot change until real borrowing rates are positive. Therefore either Congress has to cut it out or rates have to go higher -- period.
I remind you that simply on the math the only place Congress can cut it out is to fix CMS -- Medicare and Medicaid. No, that doesn't mean "cutting" either per-se; it means getting rid of the grift, fraud and similar that lace our medical system top-to-bottom. I've written literal tomes on this over the last 15 years; the "seminal piece" if you just want it in one dose (ok, two, because there's a follow-up implementation article that is linked off the first) you can find it here. Beware, its not light reading.
Resolving this would be an economic earthquake, but at this point that's not avoidable. The lobbying interests and political ads it would generate would be wildly misleading or even outright false -- and imply if not state that any politician doing it was intending to literally throw Granny off a cliff. If you're older than 30 or so you've seen those ads as an adult; they featured prominently until Obama came in and basically underwrote the entire medical and pharma industry at the federal level, but did nothing about the grifting, extortionate pricing and schemes, despite there being 100+ year old felony federal law on the books (not fines, prison terms) available and applicable, as the Supreme Court has previously ruled -- twice (Royal Drug and Maricopa County.)
So here we are with a locked housing market that will almost-certainly disruptively unlock as forced sales eventually do happen, and when they do they wind up nailing appraisals of everything else in the immediate area which then makes HELOCs and refis impossible, even under duress (since you then are "upside down") and that, in turn sets off the cascade.
All the Happy Feet dancing in the world won't do a thing to prevent this, and there isn't realistically a way out of the box other than for prices to come down, dramatically so, in the places where they've gone up the most: Housing, medical care and personal transportation, which in turn will flow through to insurance of various sorts.
That of course means the "E" part of P/E will also go down, which you would expect will lead to "P" (stock prices) coming down too, and since stock prices are a leveraged multiple of earnings that's not going to be a "small" decline either.
I know, I know, its an election year and they will keep the plates in the air -- so it is claimed.
Just ask yourself this: Was 2000 -- or 2008 -- an election year?