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I'll be honest, I called this one totally wrong. I thought it was 25 Mona, I thought, you know what? The economic data has been decent. Just this week, I, I heard retail sales surprise the upside. I thought, you know what? J. Powell and the gang, they're going to take it kind of slow and easy. They're going to do the normal 25. I was wrong, Mona. What, what do you make of it?

You know, you weren't alone there. I think a lot of folks were worried that if they did 50 basis points, there would be some concern in the markets. Markets would be spooked that the Fed knows something we don't know and that perhaps the economy is much closer to recession than we all thought. Now I think Jerome Powell did a nice job today of implementing the 50 basis point rate cut, but also then signaling very clearly that he does not think the economy is in any sort of imminent danger of a downturn or recession. In fact, he reiterated a few times the economy is holding up well, the labor market is in good shape, and this 50 basis point rate cut is a sign of confidence that inflation is moving much closer to their target 2% more than anything else.

Mona, what's your read? How, how confident are you that that is the case and that we're going to get a soft landing?

Yeah, you know, right now the data is favorable that we are headed towards what we'd call that soft-ish landing. You know, when you think about some of the hard data points that we're watching, GDP growth, last quarter 3%, this quarter GDP now that Fed projection of where the current quarter GDP is heading is also close to 3%. So 3% keep in mind well above, uh, even trend rates of one and a half to 2% but nowhere near negative growth rate. So that's a positive. Earnings growth is another underlying key factor for both the economy and the markets frankly, and earnings growth rates despite being revised lower for third quarter and fourth quarter still look on track to grow about 10% year on year, which is another positive sign. And we'd say broadly about the labor market, we are seeing a cooling, uh, not a collapsing, but it's also been driven by new entrance to the workforce rather than those layoffs and job cuts that all of us and households across the country may be more worried about. So that's a good sign. Uh, we are seeing positive data points on the inflationary side as well. So net net, we'd say, uh, headed towards that soft-ish landing, but we are glad to see the Fed is taking some serious action to, to really play some catchup and get the Fed funds rate closer to a less restrictive and more neutral level.

Mona, what do you make of the market reaction? I'm just looking at all three averages. We're actually, you know, edging lower again here. What do you make of that response?

Yeah, you know, it's interesting. Of course, we all watched, um, the CME FedWatch tool and market probabilities of what would happen today, and markets had started already pricing in a 50 basis rate cut, uh, 50 basis point rate cut, even as of Friday, you know, looked closer to 50/50, and then by the end of the day on Friday, we looked closer to maybe it was 70/30. And so the probability of 50 basis basis point rate cut was rising, but we'd say more broadly if we take a step back, uh, S&P 500 is up about 18% for the first nine months of the year or so. Um, that's a very strong growth rate. We are, of course, headed towards a choppier period, historically choppier period of September and October, and headed straight towards that election day on November 5th. We know the period before elections can be volatile in markets. Um, but notably, the couple months at the end of the year and even after election day, uh, we do tend to see better market performance. So some of what we're seeing is a little bit of caution ahead of the seasonally choppy period, a little bit of caution as the data has so shown some signs of slowdown, uh, and as investors figure out whether they are, uh, you know, should be bracing for a recession or not. Doesn't seem like that is a base case for now, but we would say is use any periods of volatility as an opportunity because history has told us that if the Fed is cutting rates and the economy is not headed towards a recession, markets are well supported in that backdrop.

You know, Mona, just going pushing a little bit further then into that, where do you stand on the growth versus value trade? Is, is now the time to be a little bit more risky? And then when it comes to large cap versus small cap, where are you seeing that opportunity or how should maybe investors be thinking about diversifying their portfolio?

Yeah, um, exactly the right questions to be asking because, uh, historically again, you know, when you think about Fed rate cuts, and this is a Fed that is poised to, to really embark on a multi-year rate cutting cycle, uh, they have outlined a Fed funds rate that'll go from the five and a quarter to five and a half percent, probably somewhere closer to 3% range. Uh, and in that environment, what tends to happen is one, when rates are moving lower, you do get to see, tend to see valuation expansion. And where are the areas, uh, that have the scope for more valuation expansion? Well, it's probably those parts of market that are not, you know, growth mega cap tech that have already seen a nice expansion, that have already seen multiples, um, rise as well. And so what we'd say is we're certainly looking for diversification, uh, probably maybe away from growth and into value, but more so a complementing of growth and value. So what we'd say is if the theme of your portfolios or of, of, uh, investments in general over the last 18 months or so was narrow portfolios are winning, tech growth is the place to be. When you look at the next 12 to 18 months, um, really you want to see balanced portfolios. It's combination of growth and value, cyclical parts of the market, uh, including areas like industrials, um, like utilities even, even parts of financials that can do well when rates are moving lower. Important to have that balance in your portfolio. And to your question on large versus mid and small, we actually like still both large and mid-cap, uh, here because we think, um, there's scope for diversification within both of those asset classes. They can do well in a Fed rate cutting cycle. We're a little cautious on small caps still because they do tend to be, um, more highly leveraged, and they tend to be lower earners, a lot more of those quote unquote zombie companies in that cohort as well. Um, but we'd say overall, make sure when you're looking at your portfolio and positioning yourself and taking advantage of those opportunities over the next few months, make sure it includes a combination of growth, value, cyclical, and large and mid-cap, uh, stocks as well. So those are the places we would be, um, as we head into this rate cutting cycle.

Mona, always good to see you. Thanks for joining us.

Thanks guys.