Decision-making within the Federal Open Market Committee (FOMC) remains a critical responsibility, and policymakers likely felt underprepared heading into this meeting due to delayed economic data still lagging from the 43-day government shutdown. Fed Chair Powell noted that the policy rate is broadly within estimates of its neutral level, emphasising that the Committee is well positioned to assess how the economy evolves. This includes gaining greater clarity on a labour market showing signs of softening and managing persistently elevated inflation. While a pause is expected at January’s meeting, new projections indicate that the median policymaker anticipates just one 25bps (0.25%) rate cut in 2026. Following the latest cut, the Russell 2000 significantly outperformed the S&P 500 and Nasdaq, reaching record highs.

Oracle’s quarterly forecast for sales and profits fell short of analyst expectations, triggering a 15% share price drop and wiping out $80 billion in market capitalisation. The company has benefited from the surge in artificial intelligence (AI) adoption, with ambitious plans to expand its AI cloud data centres. However, this growth has brought heightened scrutiny of results, similar to Nvidia, as weaker-than-expected performance raises questions about whether AI is a bubble and the sustainability of its momentum. Management also announced that capital expenditure is expected to be $15 billion higher than the $35 billion projected in September. The biggest concern now is that Oracle is financing this expansion through debt, with long-term borrowings rising by 25% over the past year to just under $1 billion.

In Canada, the Bank of Canada (BoC) kept interest rates unchanged in its final decision of the year, with Governor Tiff Macklem signalling that policy is likely at its terminal level to manage inflation, which spiked over the summer – and to support the economic outlook. The BoC has delivered four rate cuts this year, bringing the benchmark rate down to 2.25%, a three-year low. This move strengthened the Canadian dollar, pushing it to a two-and-a-half-month high against the US dollar.

UK GDP figures released on Friday showed the economy contracted by -0.1% in the three months to October, worse than market expectations for a flat reading. The data highlights the loss of momentum in the economy, overcast by the gloom of Chancellor Reeves’ Autumn Budget in November. October’s monthly GDP also fell by -0.1%, and startlingly if you look back at GDP over the course of the year, the economy has failed to grow since June. Attention now turns to the Bank of England’s final meeting of the year next Thursday, where, following a string of weak data, markets are pricing in a 90% probability of a 25bps rate cut.

To end on a positive note, Cisco Systems, once the darling of the dot-com boom in the late 1990s has achieved a major milestone. At the time, Cisco was the leading provider of internet infrastructure equipment, but its valuation collapsed by over 80% after peaking in March 2000 when the bubble burst. Fast forward to Wednesday, and Cisco has finally surpassed its dot-com peak, with shares climbing above $80.25, up 35% year-to-date. The company has positioned itself to capitalise on the AI boom, securing $1.3 billion in orders from hyperscalers, and delivered results that beat analyst expectations for both revenue and net income.

Nathan Amaning, Investment Analyst

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