Baked in the Cake

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Baked in the Cake

Informal; a situation in which the market has already incorporated expected information into the price of a stock. That is, if a company's earnings are large for a particular quarter, it may leak the information so that investors bake it into the cake, reducing the pressure for an unsustainable jump in price when the earnings are actually announced. For this reason, the Federal Reserve issues statements indicating what policy changes it might make before it makes them, allowing the markets to adjust before the announcement. It is more formally called discounting the news.