The stock market may be able to enjoy its usual end-of-year unwind once Wednesday’s Federal Reserve decision is over, according to Bank of America. The central bank is expected to cut its benchmark interest rate by a quarter percent on Wednesday. Bank of America equities analyst Gonzalo Asis said in a note to clients that the move could clear the way for the so-called “Santa rally.” “The 2nd half of December is usually the 2nd strongest period of the year for US stocks, with the S&P rising 83% of the time in December during presidential election years. This week’s FOMC (is not expected to bring fireworks. (0.76% S&P 500) implicit move) may be the last hurdle before a Santa rally,” the statement said. The stock market may need a clear signal to find its footing for the typical holiday season high. Stocks have been struggling in recent days, with the Dow Jones Industrial Average falling for nine straight sessions for the first time since 1978. rate cut, but also any negative surprises in Fed Chairman Jerome Powell’s press conference or updated economic forecasts from central bankers. These forecasts will include a dot chart that represents the expected path of interest rates. Many on Wall Street expect the Fed to project fewer rate cuts over time than it did in its previous dot plot release in September. The labor market has held up better than expected since that meeting, and while recent inflation readings show the rate of price increases is still above the Fed’s 2% target. “Market participants will be watching the economic outlook to better understand the path of policy rates over the medium term and whether the point of 2025 will be three or two cuts. We think it will land at three compared to four in September. We also expect it to show two cuts in 2026 and the term long to 3.125% to be revised from 2.9%,” Bank of America said in a statement.
