The Federal Reserve may align more closely with investor expectations this year, following a key inflation metric showing signs of cooling. The December inflation report, released Wednesday, revealed that headline Consumer Price Index (CPI) rose by 2.9% year-over-year, slightly above November’s 2.7%, but in line with forecasts. However, the market's attention focused on the core CPI—excluding volatile food and energy prices—which decreased to 3.2% annually from November’s 3.3%. This marked the first decline since July and was lower than anticipated, sparking hopes for potential Federal Reserve rate cuts in 2025.
Market Reaction and Rate Cut Speculation
The report ignited a broad market rally, fueled by the possibility of multiple rate cuts throughout the year. "The current economic trajectory is relatively stable and not consistent with a major flare-up of inflation," commented Richard de Chazal, a macro strategist at William Blair. Despite an expected pause at the January 29 Federal Open Market Committee (FOMC) meeting, traders are betting on further rate reductions in the coming quarters.
According to CME data, the probability of no rate cuts in 2025 dropped to 15.4% from 26% the previous day. On Kalshi, a prediction platform, the odds of zero rate cuts in the next 12 months fell from 26% to 22%. Analysts remain cautious, with Steve Wyett, chief investment strategist at BOK Financial, noting, "Questions about how much lower rates can go remain, but there is less talk about the Fed not lowering rates or even reversing course before the end of the year."
Persistent Inflation Concerns
Despite the optimistic market response, inflationary pressures linger. December's CPI showed the highest month-over-month increase since March, driven by a 4.4% rise in gas prices, higher rent, and a 3.2% jump in egg prices. This underscores ongoing inflation challenges amidst economic uncertainties, including potential impacts from political shifts and global economic factors.
Market Outlook and Investor Sentiment
Elyse Ausenbaugh, head of investment strategy at JPMorgan Wealth Management, highlighted that the stock market's resilience may not solely depend on Federal Reserve policies. "It is looking less and less likely that an accommodative Fed is the primary force that supports markets in 2025," she stated. Ausenbaugh expects the S&P 500 to reach new all-time highs, driven by strong earnings results and forward guidance.
Laid Off from Big Tech? Meet the Rebounder Founders
The wave of layoffs that swept through major tech companies, including Google, Twitter, and Meta, has sparked a surge of entrepreneurship among displaced workers. These "rebounder founders" are leveraging their layoffs as opportunities to launch startups and embrace the risks of entrepreneurship.
A New Generation of Entrepreneurs
Alphonzo Terrell, a former Twitter employee, exemplifies this trend. After being laid off in November 2022, Terrell, also known as Phonz, decided to channel his entrepreneurial spirit into building a new venture. A seasoned corporate leader with a background in entertainment, Terrell had always harbored entrepreneurial ambitions. His layoff became the catalyst for pursuing his dream of creating a safer online space, inspired by his experiences managing Twitter's global social media presence.
The Rise of Rebounder Founders
Since 2022, over half a million tech workers have been laid off, leading to a significant uptick in entrepreneurship. According to a 2023 survey by Clarify Capital, 63% of laid-off tech workers started their own companies. Another analysis by Live Data Technologies found a 62% increase in individuals self-identifying as founders between 2022 and 2023.
Tom Sullivan, vice president of small-business policy for the U.S. Chamber of Commerce, attributes this entrepreneurial surge to pandemic-era stimulus funding and a growing desire to solve societal problems. "The essence of why someone starts a small business is to solve problems," he said. "At no time in our lives has there been a more condensed period of problems that need to be solved."
Diverse Ventures and New Beginnings
These new entrepreneurs are exploring a wide array of business ideas, from social networks and solar energy companies to AI software and personal styling services. For many, layoffs provided the push they needed to take the plunge into entrepreneurship. Alex Whedon, a former Meta software engineer, used his layoff as an opportunity to launch an AI-powered sales software firm, Jenn AI.
Others, like Nataliya Rogachkina, are transforming hobbies into businesses. After being laid off from Meta and Riot Games, Rogachkina turned her side hustle in ceramics into a full-time business offering pottery workshops.
Conclusion
The current economic and employment landscape has fostered a unique environment for innovation and entrepreneurship. As former tech workers navigate their new paths, they are not only building businesses but also contributing to a dynamic and evolving economic landscape. The rebounder founders represent resilience and creativity, turning professional setbacks into opportunities for growth and innovation.
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