Fed Pivots to a “Meeting-by-Meeting” Approach

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Hello Peter Anthony Hovis,

The verdict is in.

The Federal Reserve announced another 25 basis-point cut, along with the authorization of fresh Treasury bill purchases to expand its reserves.

The Treasury purchasing plan softened the blow when the central bank hinted at a possible pause in the rate-cutting cycle, with an outlook of just one interest rate cut in 2026.

Wall Street waited anxiously for Fed Chair Jerome Powell’s press conference, and he suggested that the central bank has done enough to propel the labor market while leaving rates high enough to push inflation down to the 2% target.

“This further normalization of our policy stance should help stabilize the labor market while allowing inflation to resume its downward trend toward 2% once the effects of tariffs have passed through,” Powell said.

(Photo: Chip Somodevilla | Getty Images)

Powell talked about how difficult it is to navigate in the current environment. Unemployment moved higher to 4.4% in September — a jump from 4.1% in June. At the same time, the PCE index rose 2.8% in the year through September.

Naturally, the central bank sounded like it was inclined to leave rates unchanged for a while to bring both mandates to their targets.

The Fed also released its quarterly projections, and officials’ median projections showed one cut in 2026, and one in 2027. There’s a big division in the outlook, with seven officials seeing no cuts in 2026, while eight signaled at least two.

(Source: Federal Reserve / Bloomberg)

All in all, it sounded like a slightly hawkish cut.

The Treasury purchasing plan was the key that avoided an outsized reaction by the market. Over the next few months, the Fed will depend on incoming data to make decisions.

“The Fed emphasized that future moves will be data-dependent, shifting firmly to a meeting-by-meeting approach,” said Daniel Siluk, a portfolio manager at Janus Henderson Investors.
“Chair Powell reinforced this stance in his press conference, noting that the Committee sees today’s cut as a ‘prudent adjustment’ rather than the start of a new cycle.”

Right now, traders will likely look at incoming economic data to try and gauge what the Fed might do in the first half of 2026. And, of course, President Trump’s next Fed Chair pick will play a big role in the market’s outlook on rates.

Down 75% from Highs: Why Trex at $35 Looks Like a Screaming Buy

Today’s Stock Pick: Trex Company, Inc (TREX)

After the Fed’s recent rate cut, the environment is looking better for small-cap stocks that rely on lower rates for a strong business cycle.

Trex is one of them.

It operates in the home improvement industry that relies on lower rates to drive spending activity.

Now, listen: We’re trying to go green in everything. And wood decks would require a lot of trees, which bucks the trend of sustainability.

What’s more, wood decks are painful to maintain.

Wood will rot, warp, and splinter. And you’ll need to paint or stain wood seasonally. And eventually, it will fade due to termites and age. Anybody who owns a wood deck will remember these splinters that can pierce your fingers or feet.

Trex is leading the revolution of using materials that are 95% recycled and reclaimed, like plastic bags, to create high-quality, attractive decks. In fact, they often look better than wood. And best of all, it requires virtually zero maintenance (except for regular cleaning) and lasts for 25+ years.

(Source: Trex)

And you can see how composite materials last longer than wood in the photo below:

As a result, consumers are switching to composite decks more than ever. Composite has about 25% of the market share in decking, as of the most recent quarter. And composite continues to take about 2% share from wood every year.

Trex CEO Bryan Fairbanks believes that composite would eventually hold about 45-50% of the market share*:*

“…we estimate composites account for approximately 25% of the total decking market but expect it will reach 45% to 50% in the future.”

Each 1% market share would add ~$80 million to annual composite sales. Using the average of 2% growth, the composite market could grow by $160 million each year from taking the market share from wood alone.

(Source: Trex)

Cost comparison: Wood is slightly cheaper upfront versus composite deck, but composite wood is two times cheaper to maintain over the 25-year lifecycle.

The long-term comparison is simply a no-brainer in favor of composite deck. It lasts longer and requires far less maintenance.

(Source: Trex)

Best of all, Trex thoroughly dominates this niche in composite decks. The company commands more than 55% of category web traffic through its sites – trex.com and decks.com.

(Source: Trex)

And it won multiple prestigious awards for top products, brand awareness, sustainability, fastest-growing business, and best mid-size companies.

(Source: Trex)

Sure enough, the company grew 101%, which is nearly two times faster than the repair & remodeling market in the same period.

(Source: Trex)

The company sees its 2025 revenue to be at $1.16 billion, which would be almost unchanged from its 2024 full-year revenue. The company is perfectly positioned to grow when the remodeling activity recovers, as the CEO said in the recent earnings call.

“I’m confident that our strategy for long-term growth positions us to realize significant gains as R&R spending recovers,” said CEO Bryan Fairbanks.

The stock is cheap: With its strong financials, dominant market share, and solid growth, Trex’s stock was formerly popular. But due to higher rates, the stock has been beaten down.

The price was at $140 in 2022, and it is now trading at $35 a share.

Its P/E ratio is just 19.

This is a good value since Trex is a rare company that is in the right trend, dominates its niche, and holds pricing power.

Bottom line: The decking industry is going through a massive change, and Trex is at the forefront of this industry. It is known as the “Apple of the composite deck,” where its products are generally accepted as the highest-quality ones in the market. So, this is a high-quality stock.

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