The Fed left rates and the pace of QT unchanged as expected in Wednesday’s meeting. Powell’s opening statement was updated to reflect that uncertainty about the economic outlook has “diminished but remains elevated.” Powell emphasized that the Fed would maintain a data-dependent approach and isn’t in a hurry to cut rates, but left the door open for rate cuts this year.
The Fed also released its quarterly Summary of Economic Projections (SEP). The SEP provides the economic outlook of the Fed members and serves as a barometer of the board members’ broad economic and inflation views. The FOMC reduced its median 2025 GDP forecast from 1.7% to 1.4%. In addition, it increased its median 2025 PCE and Core PCE projections by 0.3% each.
The FOMC’s median 2025 unemployment rate projection rose from 4.4% to 4.5%. Overall, the updated SEP had a stagflationary tone, with growth forecasts revised lower while inflation and unemployment forecasts were revised higher. The median Fed Funds rate projection for 2025 was left unchanged from March’s SEP at 3.875%, implying two rate cuts this year. The median forecasts for 2026 and 2027 imply one rate cut in each of the next two years.
The market had a muted initial reaction to Powell’s press conference. The S&P 500 gave up its 0.3% gain, and treasury yields increased slightly heading into the close.
What To Watch Today
Earnings
Economy
Market Trading Update
We discussed on Wednesday that the market had increased its momentum sell signal and broken down from a rising wedge pattern. While not the end of the world, it does suggest that the market will likely continue to struggle somewhat over the next week.
Today is the largest June options expiration day…ever. Such is particularly the case, as retail investor speculation in 0DTE options (Zero Days To Expiration) volumes hit a record high. The surge in retail speculation in 0DTE options has been stunning since the post-pandemic market “casino” mindset took over.
Concerning the market, Goldman Sachs John Marshall estimates that over $5.9 trillion of notional options exposure will expire today (06/20), including $4.0 trillion of SPX options and $925 billion notional of single stock options. 
Most crucially, for investors, the strike distribution of S&P options expiring tomorrow is dominated by some major price points (5000 and 6000).
While this data does NOT suggest a severe market correction, these maturing options will cause some pickup in market volatility today, with downside likely outweighing upside into the close. Given the distribution of strikes, 5900 becomes a near-term target, shown below, depending on whether gamma (the rate of change of an option’s delta for every $1 change in the underlying asset’s price) unclenches or not.
However, if the market violates the 20-DMA in the next few days, there will be a decent amount of “gravitational pull” to the 200-DMA around 5850.
Continue to manage risk and trade accordingly.
Leaner and Meaner: AI Could Reshape the Workforce Very Soon
There’s been a strategic shift among U.S. public companies toward leaner operations. The chart below shows that US public companies have cut white-collar jobs by 3.5% over the past three years. Post-pandemic hiring surges have given way to the return of a philosophy prioritizing efficiency and corporate agility. Moreover, some companies are taking it further than simply trimming excesses built up after the pandemic. Per the Wall Street Journal:
“In all, about one in five S&P 500 companies have fewer employees today in both offices and the field than a decade ago, and it isn’t all due to selling or spinning off some operations, according to a Wall Street Journal analysis of public filings. That includes bellwether names such as Walmart (NYSE:WMT), General Motors (NYSE:GM) and Bank of America, whose sales have all climbed over that time.”
Generative AI is poised to accelerate this trend, with a World Economic Forum survey noting 41% of employers plan to downsize due to AI. Furthermore, that process could be getting underway in the next few years. On Tuesday, Amazon (NASDAQ:AMZN) announced its intention to reduce its corporate workforce in the coming years.
The CEO, Andy Jassy, stated that the rollout of AI agents will eliminate the need for certain jobs. Amazon’s mega-cap peers are likely on a similar trajectory. Hence, a leaner corporate future may be closer than we think.
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