Nasdaq ends the week at another record high

Market Outlook & Fed Policy - The market has priced in many positives, leaving room for the Federal Reserve to disappoint next week [2] - The key focus will be on the Summary of Economic Projections (SEP) and the committee's rate guidance for the end of 2026; a convergence with the rates market is needed to avoid disappointment [3][4] - A weakening labor market is a defining macro characteristic, suggesting growth-side risks for the equity market and the need for a bond position [10][11] Investment Strategies - Broadening investment portfolios beyond tech is recommended, considering areas like small caps, energy, and international markets [6][7][8] - Small caps are poised to benefit from declining interest rates due to their floating rate and short-term debt structures, along with less regulation and more M&A activity [7] - Offsetting equity positions with a bond position (duration) is suggested, especially given the potential for a pullback in the second half of September [9] Interest Rate & Bond Market - The market anticipates a 25 basis point rate cut next week [2][3] - The yield curve is positively sloped now, suggesting that rates across the curve should come down as the Fed starts its rate-cutting cycle, unlike the previous year when the yield curve was inverted [16][17] - Expect the 10-year Treasury yield to break below 4%, surprising many due to recency bias related to the bond market's reaction to previous rate cuts [18] Economic Indicators - Despite concerns about the labor market, other data points like GDP growth, company earnings, and consumer strength suggest a continued strong economy [13]