“At last, the economy has slowed enough that the Fed can take its foot off the brakes and step on the gas. That’s why we’re starting our game plan in the middle of next week when the Federal Reserve renders its verdict: 25 or 50 basis points. We don’t typically have a lot of drama in this business, but this one counts as a nail-biter because we really don’t know how big the rate cut will be. We just know they’re going to cut.”

“Today’s rally saw the Dow gaining 297 points, the S&P advancing 0.54%, and the Nasdaq climbing 0.65%, capping off the best two weeks of the year for both the latter two indices. The S&P and the Nasdaq suggest the Fed might actually go for 50. That’s a double rate cut. I know this because the stocks most sensitive to interest rates, particularly housing and housing-related names, soared today.”

“To use a little NFL fantasy football lingo, they soared presumably in anticipation of something huge from Jay Powell and company. All aboard! I still find myself betting on a quarter-point cut, though. It’s not that we don’t need a half-point cut, as the economy is slowing pretty quickly, especially for the lower-income cohort. However, I’ve always believed that the Fed should be measured when it cuts rates at this stage of the business cycle.

The biggest risk is that inflation might flare up again if you cut too much, and a 50 basis point cut all at once makes that a lot more likely. Plus, a double rate cut signals that something may be very wrong with the economy—something we don’t know about, something lurking. So going for 50 could inspire panic, and there’s simply no reason for the Fed to take that chance when it can simply hit us with a series of thoughtful 25 basis point cuts that neither reignite inflation nor cause panic.”

“Now, if the housing rally continues at this pace, these stocks run the risk of being too hot to handle for a mere 25 basis point cut, and we’ll get a sell-off in response. Keep in mind how the CME Group’s FedWatch tool, which tracks interest rate expectations based on the Fed Funds Futures Market, indicates that traders are now pricing in a much higher probability of a double rate cut, currently at 45%. That’s much higher than it was a week ago. These traders could indeed be disappointed if the Fed decides to be more measured. They could be your enemy come Wednesday at 2 p.m. as they dump what they bought incorrectly, and that is what happens. That’s what traders do, they let the stocks go.”

“When I look at next week, I can only conclude that we’re finally at the moment we’ve all been waiting for. So let me give you the bottom line: if we sell off on a 25 basis point rate cut, remember this phenomenal week, because there will be plenty more like it as the easing process continues and progresses.”

“JPMorgan nudged up its Eli Lilly price target to $1,100 a share from $1,050 ahead of what analysts see as looming catalysts for its fast-growing obesity drug franchise. The firm kept its buy-equivalent rating on the Club stock. On Thursday, the drugmaker announced more investment to expand manufacturing capacity for obesity drugs as well as its recently FDA-approved Alzheimer’s therapy.”

“Shares of global pharmaceutical company Eli Lilly and Company (NYSE:LLY) increased on continued investor enthusiasm around GLP-1 drugs for diabetes and obesity. We remain shareholders. Lilly’s Mounjaro/Zepbound not only offers superb blood sugar control for diabetics but can drive 20%-plus weight loss and likely improve cardiovascular outcomes in both diabetic and non-diabetic obese patients.

Lilly is developing next generation drugs, including retatrutide, which drives approximately 25% weight loss, and orforglipron, a daily pill that produces approximately 15% weight loss. In the U.S. alone, there are 32 million Type 2 diabetics and an additional 105 million obese patients who we estimate would qualify for GLP-1 drugs.

Although supply and access are limited near term, we think GLP-1 drugs will become standard of care for both diabetes and obesity and will become a $150 billion-plus category. We see Lilly setting a high efficacy bar and capturing significant long-term market share. We think the adoption of GLP-1s will drive Lilly to triple total revenue by 2030.”