The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Fed pleases the bulls.
The market opened up about 20 points and hung out around there for the day, only breaking out after the FOMC decision. The Fed left rates unchanged, as expected. The Dot-plot showed slightly fewer rate cuts than in the previous. GDP expectations were down a bit but still showed respectable growth. Inflation expectations bumped up a little but returns to the prior downward path after 2025.All in all, the Fed is not expecting enough slowing to have to alter their prior expected cutting path and they don’t see inflation misbehaving in a way that would require them hiking rates and breaking the economy. Treasury yields fell small and stocks rallied sharply.
The Fed statement and the Chairman’s press conference both worked wonders for the longs. The Fed doesn’t expect the tariff impacts to be significant. The Fed doesn’t see inflation popping up too much and they see inflation dropping later. The Fed sees a bit of a reduction in GDP but nothing too significant. Here’s the data from the Summary of Economic Projections.
This shows that all the drama of the last four weeks, which has forced investors to rethink the state of things, hasn’t changed Fed policy nor their outlook. They are seeing blue skies ahead and the market latched on to that view. Shorts got squeezed out and dip-buyers regained their confidence.
The Fed renewed its status as a friend of the bulls and the 200-day moving average (5746) is back in play. If the Fed is correct, then maybe this correction is done. If things worsen, then both the market and the Fed will be surprised and we should expect extra volatility as both investors and Fed officials will need to change on the fly.
At the moment, it’s steady as she goes. For the bulls, that means hitting the buy buttons.
See you tomorrow.
-Mike
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