into better balance without a significant increase in that employment. inflation coming down. and growth moderating without a significant increase. that's what we're trying very much to achieve. and not something we're looking to see. >> but would you take that as a signal that you should cut rates? >> obviously, what we'll do is look at the totality of the data, as i mentioned a couple of times. and certainly the labor that would be important in that. you can describe a situation like that, if it were the beginning of a recession or something like that, yes, that would certainly weigh heavily in that decision. >> michael mckie from bloomberg television radio. mr. chairman, you were, by your own admission, behind the kunk, and starting to raise rates to fight inflation. and you said earlier, again, the full efforts of our

tightening cycle, have not yet been felt. how will you decide when to cut rate. >> and how will you ensure that you're not behind the curve there? >> so we're -- we're aware of the risk. that we would hang on too long. we know that that's a risk. and we're very focused on not making that mistake. and we do regard the two. we've come back into a better balance between the risk of overdoing it and the risk of underdoing it. not only that. we were able to focus hard on the price stability mandate. and we're getting back to the point where, which is what you do when you're very far frequently one of them, one of the two mandates. you're getting now back to the point where both mandates are important. and they're more imbalanced, too. i think we'll be keeping that very much in mind as we make policy going forward. and the things we're looking at. i've already described.

we're obviously looking hard at what is happening with demand. and what we see, we see the same thing other people see, which is a strong economy, which really put up quite a performance in 2023. we see good evidence and good reason to believe that growth will come in lower next year. and you see what the forecasts are. i think so the median participant wrote down 1.4% growth. but it's hard to see. we'll be looking to predict. we'll also be looking to see progress on inflation. and the labor market remaining strong. but ideally, without seeing a large increase in unemployment that happens sometimes. >> when you begin the cutting cycle, will it be essentially run the same way you do it now, with raising rates, where you basically do trial and error, cut and see what happens? or will you tie it to some particular measure of progress? >> we haven't typically tried

to articulate, with my exception, really specific target levels, which some of you will remember the thresholds that we used in, i guess, 2013. the answer is, these are things that we haven't really worked out yet. we're sort of just at the beginning of that discussion. >> thank you, mr. chairman. edward lawrence for fox business. if the fed cut rates about 75 basis points. does that signal that there's a belief of weakness next to you in the economy? >> it wouldn't -- if that were -- first of all. let me just say, that isn't a plan. that's just accumulating what people wrote down. so that's not something. you know this. but allow me to say it again. we don't debate or discuss what the right -- who says is right. we just say who they are. and it's important for people to know that. but it wouldn't need to be a sign of -- it could just be a

sign that the economy is normalizing. and doesn't need the tight policy. >> the company could evolve in many ways. but it could be more what i just described. >> and you focused on core inflation from other meetings. how sticky is core inflation right now? >> well, that's what we're finding out. and you know, we've seen real progress in core inflation. it has been sticky. and famously, the service sectors, thought to be stickier. but we've actually seen reasonable progress in nonhousing services, which was the area where you would expect to see less progress. we are seeing some progress there, though. in fact, all three of the categories of core are now object cing, goods, services, housing services. they're all contributing at different levels, meeting by meeting, or rather report by report. so yeah. >> let's go to catarina.

>> catarina sarivo, bloomberg news. thank you for taking our questions. i just wanted to ask a little bit about, you know, we had some pretty positive data this morning and yesterday. i'm assuming those were not incorporated into the forecast we see today. but i just wanted to ask how that adds to your thinking in the inflation outlook? >> right. so we got cpi, the morning of the first day. and we've got ppi the next day; it's very late in the game. but nonetheless. participate apts are allowed to, encouraged to update their s.e.p. forecast, until probably midmorning today. after that -- so staff has to accumulate all of that and create the document little that you see. so until about midmorning, maybe late morning, it's okay

to update. and i believe some people did update their forecast, based on what we saw today. >> i mean, how are you -- when you think about, you know, starting to think about the rate cuts next year or whenever they come. how do you -- how do you think about the economy we're in now, kind of post pandemic? do you think there has been significant structural shifts? and is that going to change how you look at a rate cut path? >> the question of whether there have been fundamental shifts is really hard to know the answer and interesting one now. the one that would affect -- one that comes to mind, though, is just the question of where the neutral rate of interest is. so for example, if it's risen. and i'm not saying it has. but if it were to have risen, that would mean that interest rates would need to be a little higher to convey the same level of restriction. thing is, we're not really going to know that. people will be writing papers

about that and still fighting 10 years from now. it's going to be uncertain. we're going to be looking to make policies in this unprecedented environment. someone once said that you know the natural rate of interest by its works. but that's difficult because policy operates with a lag. it's one of the reasons we slowed down this year. we started slowing down at this meeting last year, reducing the pace at which we were adding restriction. and over the course of this year, we really slowed down a lot, to give those lags time to work. in terms of demand, has demand shifted more from services into goods? you could make the case for that. that the shift back into services is not complete. and it doesn't look like it's ongoing. i don't know. maybe people just bought so much stuff that they don't know where to put it.

>> you said back in july that you needed to start cutting rates before getting to 2% inflation. as you mentioned, pce inflation is now running on 3 1/2 on core, on a six-month annual basis, core pce is running at two and a half. though when you look at super core and shelter, they are, of course, stickier. so in looking at the different components of the data, how much closer do you have to get to 2% before you consider cutting rates? >> i mean, the reason you wouldn't wait to get to 2% to cut rates is that policy would be -- it would be too late. i mean, you'd want to be reducing restriction on the economy, well before 2%. before you get to 2%. so you don't overshoot. if we think of restrictive policy on weighing on economic activity. >> you know, it takes a while

for policy to get into the economy, affect economic activity and affect inflation. so i can't give you a precise answer. but if you look at what is in the sep. and i think you'll see a reasonable estimate of the time lags and things like that, that it would take. >> you think 3% would be reasonable? >> i wouldn't want to identify any one precise point because i would be able to look back then and probably find out then that it turned out not to be right. but we'll be looking at it, and looking at the broad collection of factors. >> hi, chair powell. jean young with market news. i wanted to go back to the stickiness of inflation question. over the past couple of years, a lot of central bankers have talked about the more difficult last mile of getting inflation back down to 2%. yet it's also been surprising

how fast inflation has come down this year. i'm curious, do you think something has changed in our understanding of inflation? or do you subscribe to this notion still? or is it something different about the u.s. economy? >> i think this. we've felt, since the beginning that it would be a combination of two factors. the first factor is just the unwinding of what happened in the pandemic. the distortions of supply and demand. and the second thing would be, our policy, which was weighing on aggregate demand and making it easier for the supply side to recover. we thought those two things would be necessary. >> say the last part of your question again. >> if there's something different about the u.s. economy. >> yeah. so it's not -- it may or may not be about different, about the u.s. economy being different. i think this inflation was not

the classic demand overload, pot boiling over kind of inflation we think about. it was a combination of very strong demand. both on the good side and on the labor side. this is just very unusual. and you know, we had the view. my colleagues and i broadly had the view. that we could get a lot. essentially a vertical supply curve. because you ran into the limits of capacity at very low levels because there weren't workers. and because people -- the supply chains weren't broken. we had the view that supply chain could come down. to the extent demand lowered, reduced. and something like that has happened. it happened so far. the question is, you know once that part of it runs out. and we think it has a ways to run. we definitely think that the sort of supply chain and shortage aside, has some ways

to run. does labor force participation have much to run? it might. might be at some point, you will run out of a supply site help. then it goes down to demand and is harder. that's very possible. but to say with certainty that the last mile is going to be different. i'd be reluctant to suggest that we have any uncertainty around that. we just don't know. inflation keeps coming down. the labor market keeps getting back into balance. and you know, it's -- so far, so good. although we kind of assume that it will get harder from here. but so far, it hasn't. >> we're going to make this the last question. >> hi, chair powell. thank you for taking our questions. meg with barrons. i want to ask about rate cuts and can you talk us through the latest thinking and has there been any consideration of

tightening the pace of quantitative of all. >> we're not talking about altering qt. just to get that out of president way. balance sheet seems to be working pretty much as expected. what we have been seeing is, we're allowing runoff each month. we're close to $1.2 trillion now. that's showing up the facility has been coming down quickly. and reserves have been moving up -- as a result or holding steady. at a certain point. you know, there won't be any more to come out of. there will be a level that reverse repoe facility levels out. and at that point, reserves will start to come down. we still have, you know, our -- you know that we intend to reduce our securities holders until we judge the quantitative

reserve balances have reached a balance somewhat consistent with that level of ample reserve. so we intend to slow and stop the decline when reserve balances are somewhat on a reserve level. we're not at those levels. with reserves close to $3.5 trillion. we don't think we're at those reserves. there is not a lot of evidence with that. we're watching it closely. and so far, it's working pretty much as expected we think. >> will you be adjusting that thinking at all? adjusting rate cuts? is that time to rethink? or is that following that thinking? >> so i think there aren't independent tracks. you're asking another question. i guess you're implying the question of, can you continue

with qt at such time. >> the answer is depends on the reason. if you're cutting rate, going back to normal. that's one thing. if the economy is really weak. you can imagine, you have to know what's appropriate. with that, welcome to closing bell. i'm scott wapner. at the fed exchange. you can see, chair powell, wrapping up his news conference. in what can really only be called doveish language from the statement. and from the fed chair himself. as a result of that, stocks are rallying. want you to take a look here. the dow, a new record high, was trading above 37,000 for the first time ever. stocks are higher and sharply

so across the board. yields are going the opposite direction. look at the 10-year note yield. 4.04. just an extraordinary bit of events there. they're proceeding carefully. they're seeing what they wanted to see, in terms of inflation coming down. you mentioned your own estimates of pce coming close to target. stocks a little more on that. he said the fed is quote likely at or near the peak of that rate cycle. stocks up a little more on that. bob pisani all calling today. our own steve liesman joining us saying the feds took a step toward the market rather than the other way around. >> jeffrey, welcome back for our final visit of the year. i'm glad you're with us today. >> we made it all the way to

december, judge. interesting timeless. >> what is it? >> the word of the day is doveish. last word was careful. he said that multiple times last meeting. market likes that, because it respected the fact that the curve is inverted and economy is slowing down. but that any word didn't have to be inserted. and it strongly suggests that the fed inserted that because they believe, i think, that they're done. and not only are they done. but a lot of people don't realize, is the fed has been in that hold for four of the last five meetings. so it's a trend. and what a rally it's turned into. it's been quite a good six weeks wheeze had a november to

remember, one of my clients said in a meeting yesterday. with one of the best months ever for the investment grade bond market up over 4 1/2% since november alone, that hasn't happened since the '80s. which is something. last time it happened was you were starting with yields at 10 1/2%. and even bigger basis move in rates. i thought the most interesting came near the end. where if i heard it right. i think jay powell wants to cut rates to 4.2 if i heard him right. he's respecting the rate of inflation. just like i criticized him a year ago by going too slowly, and inflation shot 500 basis point above where they thought it was going. and now it's coming down just as fast. i heard a lot of people, before

the announcement, were talking about, you know, you can take three-month pce. look at core this and that. one-month data there's ways to look at 2% number. and i'll add one here. core shelter which is at 2%. the reason is it is a core shelter. going to come down by at least 400 basis points. since that's about 30% of cpi, there you go. so our cpi model suggests that we're only going to get a one- month handle. and that is possible because it could be 2.4 in june. if that is the case, i think

the fed will cut rates. because i think i heard jay powell say, we can't wait for inflation to be at 2. he respects the momentum on the down side, because he learned a little lesson on the up side. >> he said they're aware of the risks of waiting to cut rates too long. he mention the on numerous occasions today, the possibility of cutting for the so-called right reasons, if the economy is just normalizing, you got from the outlook today, the so-called dot plot. 80 points cut this year. as i mentioned, the fed moving closer to the market, rather than the other way around. would you agree with that? do you see cuts? and several of them next year? for the right reasons? >> i don't really see them for the so-called right reason. thaoeufpbgts what is baked into dot plot. and a little less so to the shape of the yield curve. that they're just going to cut

by three-quarters of a percent. >> i think that's pretty unlikely. i think so if they cut rates that much, they'll have to cut them more than that. so i believe that we're going to see the yield curve deinverting. i think we will still have bonds rallying. we're broken down the trend lines. and there's a lot of room below it. i will guess what we see the treasury yield in the low 3s. and that would be consistent in my view, only with the fed cutting, i don't know, like 200 basis points next year. i think we're looking for recession next year. we have been talking about this. the market seems to be picking up on that. and we're starting to see the good part of the pivot from the fed, which is relaxation financial conditions. and that leads to, for the first moment. risk assets doing well.

and of course, they've done really, really well since the last fed meeting. and i suspect it is not going to be a trend change before year end. but i believe -- i noticed the action of the stock market was interesting today. because as the 10-year treasury got all the way down to 4.0% and it couldn't break through. i noticed the stock market started to lose momentum. and as it backed up, there's just a few basis points. but there's something about if you break on the four of the 10- year. it almost sounds like a fire alarm going off. and i think we might start to see the correlation of strong bonds and strong equity starting to break down. when it comes to investment strategy. i emphasized, i don't like the t bill. you want to be a little further out the curve.

and marry nawith long-term treasuries. and i think that is likely to work. and i think it is likely to continue in the new year. we have been advocating strongly for this. and we've gotten a lot of interest from institutional clients. and one of them called us today and said, gee, did we miss it? i think all of this money that is in money market funds. and that might be overallocated to money markets and bonds. i think the logic that people have, that money market bloat, is going to go into the stock market is wrong. i think it is unlikely to go. i think they're much more likely to go from their mountain of cash in t bills into bonds. so i think that the strategies that i've outlined in the past couple of times we've met, which is in the mix of credit. i think you stay with it for

now. i've been thinking about that movie "braveheart," where they're about to attack. and mel gibson character sating, "hold, hold, hold." they want to fire or do their assault but they have to wait for the right moment. i think you have to wait for the right moment to alter this bond. >> maybe some goes into stocks because they see the possibility of a powerful new bull market developing. i'm going to go to -- hang on just for a second, jeffrey. steve liesman just stepped out of the room and i do want to go to him. because steve, this was extraordinary on a number of levels, i think. number 1, the fed chair in his news conference did nothing to walk anything back from the statement. he did nothing to hawk it up, so to speak. and i know he sounded like it

would be premature. and he said as much. premature to victory. there was no jump suit. no aircraft character. but he doesn't seem like he's that far away either from doing just that. >> i think this is a pretty big day. i think the fed pivoted today. i think it went from having this bias to being in neutral, with a forecast to cut rates. i think that's a pretty big deal. and he acknowledged in response to my question, that yeah. they sat around the table today and yesterday. and they talked about rate cuts. here's a quote from the press conference. >> the other question, the question of when will it become appropriate to begin dialing back the amount of policy restraint in place? is that begins to come into view. and is clearly a topic of discussion. and also discussion for us at our meeting today. >> scott, i thought the chair might have tried to hold back the water on the dam one more

meeting. i guess the day they -- yesterday and today, especially the ppi and what it said. he mention would this specifically. we talked about it on your show at noon today. what the data today says what is going to happen to the pce numbers next week. made it kind of untenable for him to hold back and enter a position that was too hawkish. and just real quick. we have been talking about this number that jeff was talking about. this cpi ex-shelter, which has been down below 2% for several months now. there's that number right there. you can see it. it's down below 2. okay. so it's not fair to take shelter out. the reason you take shelter out is, the shelter component that they use there is lagged about three-quarters, scott. from some of the other market- based indicators out there. and if you fold those in, you maybe have a problem. it may be that the fed is already there. and the concern was, that the

fed was that they would keep the rates high and press the economy too long based on bad data. >> steve, i appreciate it. it's quite a day that i know we'll be talking about. that's our senior economic reporter. steve liesman. jeffrey, how come you're not willing to go as far as to say, you know what? i no longer think that we're going to have a recession? i'm wrong at this point? the economy is better than i ever thought it would be at this point. inflation has come down much quicker than i ever they it would be at this point. and you know what? maybe the fed is going to pull this off afterall. >> i don't think inflation has come do you think faster than i expected it to. it's really followed the trajectory pretty closely. and it's going to continue to fall further. i just think a lot of the way the cycle works.

brian kelly on that segment. >> i know you were talking about david kelly. >> david kelly, yeah. >> and he was talking about a pivot that he saw. that this was a pivot today. >> not just that. he points out that when you first start raising rates from low levels, it doesn't have a real market damage. but then similarly, when you start cutting rates, from high levels, you start to affect the economy in a negative way. somewhat counterintuitively. people might wait for lower interest rates if chaircoming. to accelerate the deterioration in the economy. also, the fed themselves is projecting a 4.1 unemployment rate. which would be up about 70 basis points from the low. and whatever historically, the urn employment rate is going up by 50 basis points, it tends to accelerate there to a higher level. goes into another gear. and it's very consistent,

historically. i think there's a contradiction, between the dot plot of unemployment rate going to 4.1. and history. i think the fed is going to be wrong on the low end for the unemployment rate for 2024. and i think once you get the market, deinverting the yield curve. and you get the bond cemented into the dna of investor psychology. i think that's the peak. that's why i say it's okay for the braveheart idea of hold, hold, hold. and you have to pivot. maybe i'm wrong. and it doesn't happen next year. but i think the odds have gone up, not down. we saw gdp now was up about 5% in the third or so quarter. and now running substantially less than that. and talking about maybe 1% next year. and i just don't think that's the way the economy works.

just like inflation overshoots on the upside. it overshoots on the down side. i think the economy is going to undershoot on the down side. and that is going to create a response. we will have to have a lot of money printing, i think, to battle the coming inflation. you have to battle across the board. this is a long view type of thing. but for now, i think the feds' pivot needs to be digested by the markets. and obviously, a lot of that digestion happened today. and we'll see how the rest of the week plays out. because that pretty much takes us into the end of the year. >> i want to get your overall assessment of this fed. tiremember so many conversations we had through this calendar year. ones where you suggested that

powell was mr. magoo, going to drive into a wall. other times, suggesting he was up on this ladder and it was time to paint or get off the ladder. >> yeah. that was since the beginning. and here he is, what i felt today a bit of a confident air about him, in the way that they described this battle in the last few months and feels like they're in a pretty good space. how would you assess that? >> well, i think he does feel that way. and tell may be transitory. he might just be in a goldilocks sweet spot. but the mr. magoo thing is how the fed historically keeps raising and raising things until it falls apart. and he hasn't done that. we have had four to five pauses. that's a lot different than mr. magooing it and bumping into dumpsters and stuff. he seems to have gotten in sync

with the leads and lags a little bit better. i think he's learned something over the past three years, thankfully. so we're at that point, where he has repeated as steve liesman said. that's anything but hawking it up. that's him saying, some of the tightening is yet to be felt. and that's going to be the case, as long as we're higher for longer. you're having problems in the system. you have a lot of loans. you know, you've 2k3w09 banks that have investment portfolios, yielding 3%. and the feds' fund rates at 3 and 5%. they're losing money on that. you have small companies that are having elevated borrowing costs. and every single day, it becomes more painful. and every month, they have debt at lower interest representatives that is rolling off the fixed rate debt that may be issued a few years ago. that's rolling off and that's

higher. this is working its way through the system. he understands that. so i compliment him on that. he's learned. and i think -- the only thing i can fault the fed for in the past five meetings, is that they shouldn't have hiked at all. they should have stayed on pause the whole time. but that's pretty close. and one more thing i want to say about economic indicators is the commodity price trend, which has been straight down in a nonstop way, on a moving average basis, for the better part of two years. and the bloomberg commodity index just can't get above its 200-day moving. the gap is getting wider. so the gaps today, commodities, broadly, on the d-comspwaeuz are unchanged. so the stubborn weakness is further suggestion to me that inflation is going to be lower than people think. and i'm wondering if we wint

have a zero year over year inflation at some point in 2024. >> i understand why you make the bullish case you do for bonds. which as you said, had a historic rally. november was the best month for treasury since the '80s. for obvious reasons. we dropped near 100 basis points on the 10-year for example. but why shouldn't people buy stocks today? why shouldn't they say? >> because they're up massively since the last fed meeting. and they're -- pretty rarified territory. and the economy is going to be slowing. and earnings are going to be less robust than people think. but if you want to own stocks. and of course, everybody owns some. i think one trend has been very clear throughout 2023, for good reasons. is that equal-weighted stocks, like lower interest rates. and they don't like higher interest rates. the magnificent 7 don't care really. they're in a world of their

own. but we've had a lot of talk about equal weighted, versus market cap weighted. and we've seen equal weighted do quite well in the last meet being. there's a reason for that. the fed hikes hit equal weighted more thanhe higher. it's the smaller companies that get taken out. so i think you want equal weighted rather than market cap weight at this point. i don't think there's a terrible valuation. >> it's maybe 15 times. >> yeah. it's a little too high. >> it's not crazy high. someone could take what you're saying, jeffrey, as making the case for an everything rally. that the equal weight part of the market. the s&p473, or 493 for a better description, obviously, is going to get a move. and the next moves, of alcohol

are cut. the economy still hanging in there. why not? >> i think the everything rally concept is a realization of what has happened in the past six weeks. and we've kind of expected that. because we now have the full fed pivot. it sounded pivottish. but it was more balanced back november 1st. but now we have a full fed pivot, showing up with "any." so i just think that we're getting late in the cycle. and you can hang on there, with risk assets. and i'm not exactly advocating against it. particularly in the higher credit sectors. but not investment grade. but maybe double-b sectors of parts of the bond market. but even there, i think you will have a reversal come the middle of the year. so we can hang over there for

now. but i think they are valued from where they were. i don't know. say, six weeks ago, or certainly back in march. >> it is a stunner, lastly, before i let you go. as far as yields have ome down. you mentioned, you know, you'll have low 3s by the end of next year sometime. we could have high 3s by the time i say goodbye to you. here today. which is remarkable, considering we were at 5%, not that long ago. >> yeah. october 23rd. in fact, the "new york times" had a business article that i saved. because it said, rates are not going to come down any time soon of the business sector. but they're ringing the bell. i'll leave you with a saying that old timers like me need.

stocks are needing bonds and they're getting it. but we'll get into that phase, i think, in the second quarter or so of next year. where bonds don't need stocks. but stocks won't be participating the way bonds will. that's how i think about the pivot. but i also think it's going to be a year of great volatility in 2024. >> we'll look forward to spending it with you. i can say one of the true highlights of this year, jeffrey. i look forward to doing the same thing next year. >> i've enjoyed it. >> we'll see you. >> good luck, everybody. and good luck in the new year. >> that's jeffrey gundlach. let's bring in cnbc contributor, josh brown. >> i'm crying. i have tears in my eyes. >> what is your asment? what does this mean for stocks

moving forward? >> some stocks are overvalued. but on the whole, the asset class, not overvalued. it's the only thing. jeff just spoke for 30 minutes. the only thing i disagree with him. you can buy stocks. you can buy large-cap basic materials, nine times earning. i feel like there's a lot you could be doing, away from the s&p50. most of which are tech consumer discretionary. there's a lot you can be doing where you are not over paying stocks. especially if you want to take the fed at their word that we're going into a cutting cycle. i categorically disagree. money markets were the trade of the year. 6 million in money markets now. we don't need it all, quote/unquote "all" to go into stocks. if any of that goes into stocks doesn't have to go into the vpy

atf. it can go into the aristocrats. look at the way they're treating the vig, v-i-g, van gard. >> everybody understands this. you can buy stocks without buying the seven stocks. and that's the trade now. i think that carries us through. i have tears in my eyes. this is like a romantic comedy. going out with 12. what else do you want? we have vanquished? who is laughing? liz? we have vanquished 9% inflation. we did it. we did it, without a single person losing a job. please. please understand that. we just printed plus 100, 99,000 new jobs last month. and the war on inflation. stocks cheap enough to buy. all of the most widely held stocks in america, having massive, double digits, in some

cases, triple-digit rallies off the lows. plus, we averted a potential banking crisis. what else could you have asked for out of 2023? i don't know. >> you make the argument that the bear case is firmly dead at this point. >> no. no. the 2023 barricade is dead. the 2024 is still ahead of us. there are probably oing to be reasons to be concerned. but right now, as we end the year, you think about all of the things that went bump in the night. all of the things that we focused on, day after day, that could go on. none of them went wrong. they still could. they haven't. that's the story of -- by the way, the story of 2023. a lot of conventional wisdom got turned onto your once again. i was talking with a housing market yesterday. you had fed funds essentially. you had mortgage rate go from 6% in february to over 8%. it actually started from 2.6% a

year ago. what did home builders do? >> all-time highs. >> a lot of things that weren't supposed to happen. and the big story. the fed was not supposed to be able to quote/unquote, win, the war on inflation, without costing us any jobs and without throwing us into recession. >> as the fed chair and i thought about this, too. we didn't get to talk about it. yet in the news conference, he was discussing why in his mind, the inflation that was caused in this cycle wasn't traditional. it wasn't caused by some out-of- control demand. it was caused in many respects by supply shops. they were buying mortgage bonds when mortgage rates were low. and you can criticize the government for piling on with a lot of the stimulus. but in many respects, maybe the reason we're even having these conversations is because those things happened. >> yeah. >> and the reason why he could

maybe declare victory at one of these meetings is because better late than never. they were aggressive. they were quick. and now we'll see what happens. >> jeff was quoting from braveheart. i'll do my own. william wallace said we all end up dead. it's just a question of how and why. every bout with inflation ends up dead. it's just a question of how and why. the 1970s inflation paradigm was the wrong paradigm. i'm not the only person to point out. the real paradigm was post- world war ii. we had tons of stimulus in the system. that's what was necessary for the arming of the country and the world against the axis. that inflation took like 10 years to work itself out of the system. we had rise being rates throughout the 50s. and yet, stocks were allowed to

work. and we didn't really have any economic issue. we had this massive burst of stimulus to make sure society didn't tear itself apart. it worked. we actually did too much of it. but it was not this lingering issue in the way that it was when we had oil embargoes and the like. it was man made. we created it. and we were able to allow enough time to go by for that inflation to moderate. and it's not fully out of the system. and people are still paying high prices for shelter, for healthcare. auto insurance sucks. i get it. i'm not saying everything is great. considering how much worse things could ave been in this fight, to bring inflation down, from nominal, 9%, back on the road to 2. it could have been way worse and it wasn't. >> we're not insensitive at all, about the layoffs that continue to be announced. >> on a net basis. thankfully. >> and not to the degree,

which? some look at in this cycle. the worst case projection. >> judge, last thing on this. you have 8.6 million open jobs. if you were ever going to be laid off, this is not the worst time for that to happen. of course, we care. on a net basis. we did not have to throw millions of people out of work to tame inflation. that is the story of the year. >> listen. stay with us. let's take a quick break. when we come back, we'll forecast the fed and the market. sofi's liz young joins us. we'll get her reaction to the news conference. more importantly, what it means for stocks, moving forward. we'll do that when we take you inside the market zone. knock, knock. number one broker here for the number one hit maker. -thanks for swinging by, carl. -no problem. so what are all those for? uh, this lets me adjust the base, add more guitar, maybe some drums. -wow. so many choices. -yeah. like schwab. i can get full service wealth management, advice,

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all right. we're now in the closing bell market zone. reminding you once again, the dow jones industrial average is above the all-time high. and it is set to closed at an all-time high. right now, join josh brown. sofi's liz young is here. cnbc market commentator, mark santoly, everybody to break down these final moments. liz young, to you first. to the bears. throw caution -- >> ouch. >> i didn't say you. though caution to the wind now or what? >> first of all, i get excited to be in the market zone. i never get to do this. >> welcome. >> i think you can throw caution to the wind for a little while. things changed today.

and gundlach used the word pivot. we went to a different conversation. they declared hiking. they said that's over. now talking about when we should be able to cut. the idea of the market pulling cuts forward, though, i think, is precarious. we don't have a lot of time between now and march. and the fed likes to foreshadow things really far in the future. first we talk about cutting and then we actually cut. they need a little more time than that. i think cutting is danrothink t the last hike and the first is usually okay. so i think you can, for the time being, jump into this rally. let it run. let the clock run on it. but as soon as that first cut comes into view. you get more nervous. >> mike. save for a cut happening today. this was about as doveish as the bulls could have ever hoped for, right? >> i think it was high hopes exceeded. because i think we really did

expect more of a nuance type. he didn't throw out many of the typical disclaimers. >> he didn't hawk it up to walk back anything from this statement. >> right. now that being said. the dow, s&p within 3% of record high. you make a run at it over the next couple of months. all the things heading in the right direction. the fed is now no longer in the right direction. fed is not really targeting market levels. it's not looking back for bank shots. it cares about inflation. the only thing that matters. they don't have to look at job openings anymore. it's all about the inflation numbers. that being said, so much has work the in favor of this market in the last two and a half months that you have to

start to sit back and say, how much is left? you had the soft celebration rally. the rate reduction in banks. you have the heavily shortaged garbage. and repositioning. a lot of that is different right now. i think you have to be at least cognizant of the idea that it's everybody can clap and say we did it. and say it's a culmination type moment. and then figure out what it takes from here. and it may be a 4% nominal gdp if you're lucky and everything comes through. >> josh, he had a chance today to express any sort of concern or worry that financial conditions have loosened given the 10-year is down. and stocks are up in the last six weeks. and he really didn't do that either, to mike a point. >> if this doesn't tell you inflation is the only thing in town, nothing else will.

>> say, during the tightening cycle. that it operates on a lag. then let's also say, the cutting rate. the risk of cutting rates is probably not an immediate risk of things getting too loose. because that operates on a lag as well. at least that's how i would choose to see it. i'm curious from you guys. the two-year. we talk about the 10-year. the two-year, down 30 basis points today. four spot, down five, is it enough. >> one day moving. two-year. you look at that -- >> huge move. >> you think that was some kind of small -- >> looks like snap chat in earnings. >> right. just volatility that big in the treasury market is not a comforting sign to me. is it down enough in one day? i think it's plenty in one day. >> especially if we expect rates to be cut in march. you have a resteepenned yield

curve. which might be good? financials. that might be a good time to start towing into something like financials. but yield cuts. >> top performing sectors. >> not a shock to me. >> pure rate beneficiaries, and one underowned. one is to me, the biggest drags in s&p. microsoft down. >> i'm glad you went there. because it's exactly what where i wanted to go. microsoft is down. alpha is down. >> down a smidge. >> however. that's where i want to go t. there's been a lot of talk about this pivot. did chair powell make a way to look at the pivot and make a

broadepping move? and does it look at near-term risk. >> largely, market is leaning that way. we have the nasdaq 100. we've kind of front run that idea. and in terms of how much risk they run. i don't know. giving only 130 basis points in a day. it's about kind of really damaging our trends. i think it's much more about where the incremental dollar goes. what's owned. maybe the index itself will have a little more of a struggle. but it explains the 12x. you have low correlation for now. it's one of those things, reminds me. like 2017. you finish on a melted market. 2018 is when you had that out of northern. people got just kind of

completely wedged into this meltup mode. >> does he think that money is going to pour out of money market stocks. where that's one of the bull cases here for the next major leg to this market. by the way, s&p just hit 4700. again, just to let you all know again, dow jones industrial average was high there. anything above 37,000 and change. what do you make liz, of that idea that money has now gotten the go ahead, so to speak, to come out of cash and stocks. and they go into bonds, too. >> think about the reason it went into money markets in the first place. because you could get close to 5% in yield with little to no

risk. so you may have to quince them to come out of a 5% yield, with little to no risk. i think parts of the expectations on some are parts of the market that are overvalued. i don't think that's going to happen. and i think you see a slow flood from money markets as rates come down. but i think he's right. it doesn't all go into a band wagon. but we talked about this the last time i was here, too. that was the tipping point. if people come out of money markets. they have to deploy it into cyclicals. not just utilities. not just staples. cyclical and high credit and high yield. that goes into maybe we breach the all-time high. >> better than 3%. three and a third percent right now, pushing 2,000 on the russell 2000. >> i think you have a

smorgasbord of laggards that are now almost like putting in overtime to try to catch up, which is what the thesis has been. really since thanksgiving. it's all playing out. look internationally. how european stocks want to go this year. european financials. look here, stateside. you got biotech up 3 percent today. businesses, underlying those stocks are not rate sensitive. the stocks are rate sensitive. ask they are moving. metals and mines up 3%. these have been lagging sectors. and in some case, places that have been a lot of pain. utilities have been awful.

but they pay yields. yields are coming down. and you will see the rotation. and i think it has led to january. >> mike, we're on the three- year watch. 401. >> honestly, a lot of folks, for good reason, thought it would be sticky in the 410 to 390 area. we'll see if that holds. this is going to be. the fed is done. and we can kind of reaccelerate in the economy. you kind of have to start thinking of the first. regional banks. they're flying. everything is, you know, it's hard to really find fault with a lot of it. except for the pace of it and

the idea that nothing just started today. >> better than 500 points now. highs in the day for the dow. thank you so much. >> same to you, liz young. mike santoly, as always, we're going to stick around of course. that bell marks a new high. dow jones going to close above 37,000 for the first time ever. i'll see you tomorrow into o.t. with morgan and john. closing a session high, record close with the dow industrials hitting 37,000 for the first time ever after a fed policy pivot. new two-week highs. s&p finishing right above 4700. that is the score card on wall street. but the action is just getting started. welcome to closing bell over time. >> we have reaction to the fed and the market's big rally. we are going to talk