“It was already baked into the market reaction.” It’s something we at Marketplace, and other business news outlets, say when big news happens and the markets don’t seem to care. But why not? “I would say that the analogy to baking, when we talk about ‘baked in’ is pretty appropriate,” said Sasha Indarte, a professor of finance at the University of Pennsylvania’s Wharton School.
It’s a bit on the nose, but stay with us. Once all the ingredients are mixed together and the cake is in the oven, what’s going to come out when the timer goes off is already decided. It’s baked in.
The market works kind of the same way. Once news — or more accurately, anticipated news — is incorporated by stock market traders and other economic decision-makers, the news isn’t really new when it happens. “For example, when the [Federal Reserve] makes its announcement about monetary policy rates and the path of monetary policy going forward, we don't always see a big market reaction,” said Indarte. “Sometimes mortgage rates
or stock prices don’t move a whole lot.”
Take the analogy just a hair further: When markets don't move a whole lot on what otherwise would be big news, it means Wall Street has a pretty good recipe for what the future market is going to look like.
“What are the ingredients here? That would be the data that would be things like job reports, the latest inflation numbers,” Indarte said.
And all those ingredients taken together? When mixed, they make a forecast. And that’s kind of like the batter, Indarte said. So long as they get the batter right, when the Fed announces interest rates, there’s not going to be a big market reaction. But, as anyone who’s baked can probably relate to, sometimes you get the batter wrong. | 
