Welcome to the Forward Guidance newsletter, brought to you by Casey Wagner, Ben Strack and Felix Jauvin. Here’s what you’ll find in today’s edition:

• Felix digs a bit deeper into how markets are digesting Trump’s victory. 

• The FOMC’s November meeting wrapped today. Casey breaks down what happened. 

• This crypto CEO didn’t support Trump. But he’s bullish after his win.

What’s the market saying about the Trump win?

After Trump’s election win was confirmed (and with a likely sweep of Congress), markets began to digest the news. 

In bond markets, the major factor was a Congress sweep that will allow unrestrained legislation from the Republican party. This — paired with concerns around a re-accelerating economy and potential inflationary policies, such as Trump’s tariffs — sent long bond yields soaring globally, but especially domestically:

At the same time, the DXY soared as global investors anticipated higher nominal growth and a roaring economy in the US. That said, half the move has reversed today alongside a calming down of long bond yields. 

So what does this all mean? And what were the implications for the Fed as it entered its FOMC meeting today?

As Jim Bianco shows in the chart below, this reverse in yields on the long end since the Fed’s first rate cut is historic:

Regardless of what the Fed does to the short rate (i.e the fed funds rate), the vast majority of the economy borrows and lends on the long end of the yield curve, such as mortgages.

Therefore, regardless of what happens to the short rate, the surge in long bond yields has been tightening financial conditions. 

With respect to today’s FOMC meeting, Powell needs to carefully consider where he wants to attempt to guide yields. There are currently two evolving approaches:

Andy Constan of Damped Spring Advisors believes that for yields to come down and counter-intuitively ease financial conditions, the Fed needed to be more hawkish today and potentially pause its cuts. In his view, more rate cuts could actually tighten conditions as bond vigilantes show up and send bond yields higher — doing the tightening the Fed refuses to do. 

On the other side is Tom Lee, who believes the Fed needs to be even more dovish. This is because a large portion of what comprises the price of long bond yields is expectations on short rates for the maturity of the bond. 

With the FOMC’s 25bps cut today and no signal yet of an end to QT, it's looking likely the Fed will continue to wait and observe how its current rate-cutting path transpires and is digested by markets.

— Felix Jauvin

The number of pro-crypto US House members so far elected, according to Stand With Crypto’s tracker. This compares to the 117 elected House members deemed to be anti-crypto.

That 263 figure accounts for roughly 60% of the 435-person chamber, with more races yet to be called. 

A couple “critical elections” Stand With Crypto continues to track are those of crypto-friendly candidates Yadira Caraveo (D-Colo.) and Lori Chavez-DeRemer (R-Ore.). Caraveo leads her challenger, while Chavez-DeRemer currently trails her opponent.

The FOMC today, as expected, lowered interest rates by 25 basis points. Committee members cited a commitment to “achieving maximum employment” and a 2% inflation target as reasons for the decision. 

Odds of a second 25bps cut in December are now at 66%, according to CME Group’s federal funds futures markets data.

The FOMC’s forward guidance (see what we did there) from this week’s meeting remained unchanged, indicating committee members likely are confident that interest rates will end 2024 another 25bps lower.

“In considering additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook and the balance of risks,” today’s statement read. 

It’s the same crucial sentence we’ve seen before, which shouldn’t shock markets. And, as a result of no surprises, stocks should see at least a mild extension of their Trump-fueled rally, according to Sevens Report Research founder Tom Essaye.

“Given yesterday’s strong rally, I’d expect some digestion of the move or a mild drift higher,” Essaye said. “However, this outcome should keep expectations for a rally into year-end in place, led by cyclical sectors — industrials, financials, small caps [and] energy — with tech and defensives lagging.”

The S&P 500 was up 0.6% over today’s session in the moments after the Fed’s decision, while the tech-heavy Nasdaq Composite had gained 1.3% just after 2 pm ET.

— Casey Wagner

Galaxy Digital reported its third quarter earnings this morning, though founder Mike Novogratz’s remarks on the election stood out to me most. 

“The last quarter seems a little less relevant right now given that this is kind of a whole new world,” the CEO noted. 

He was, of course, alluding to Donald Trump’s win and the impact the president-elect’s pledges, if fulfilled, could have on the crypto industry. Not to mention the flood of pro-crypto Congress members elected Tuesday.

Galaxy’s stock, which is listed on the Toronto Stock Exchange, rose about 25% Wednesday, and went up another 16% Thursday, as of 2 pm ET.

Novogratz did not publicly support Trump. “I was actually on the other side,” he noted on today’s call.

“But I was always pro-crypto, and I thought, let’s do the best we can to have a bipartisan agreement,” the exec said.

Novogratz noted the crypto-friendly people Trump will have around him. Outside of JD Vance, he mentioned RFK Jr., Peter Thiel and Howard Lutnick. Here’s a reminder of what Lutnick, the CEO of Cantor Fitzgerald, said about bitcoin in September.

The Galaxy CEO said he is expecting “one piece of good news every week” for the next one or two years. 

Among those could be new appointments at the SEC, FDIC and OCC, he said — adding that he expects SAB 121 will be “repealed very quickly.” 

That SEC accounting guidance is what many say has kept a number of traditional players out of the crypto industry. President Joe Biden vetoed Congress’ bipartisan resolution that would have invalidated SAB 121.

“When you bring in the [BNY Mellons] and the State Streets as custodians, [and] when you allow TradFi competitors to own crypto on their balance sheet, it is going to unleash a tsunami of institutional participation,” Novogratz said.

— Ben Strack

• Bitcoin hit a new high at roughly $76,700 just before this newsletter was published.

• On Wednesday, Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, gave his first public speech since taking over from former enforcement head Gurbir Grewal last month. He reiterated the commission’s commitment “to hold bad actors accountable” and protect investors. 

• Donald Trump’s second term could bode well for US large cap tech stocks, if history is any indication. XLK and QQQ gained 93% and 82% between Election Day 2016 and the end of 2019.