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Why the Federal Reserve just killed the stock market rally



Mr. The market always wants everything.

<p class = "Canvas Atom Canvas Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "So It was no surprise that the stock Wednesday's downtrend came after Fed Chairman Jerome Powell made a well-designed presentation for the headline journalists Wednesday afternoon: The Dow Jones Industrial Average fell 141 points, close to its lows, and broke one Series of very optimistic bonds Big bank stocks such as JPMorgan Chase and Bank of America, which were doing well on Fed Day, were hit hard, with yields on 1

0-year US Treasuries falling to their lowest level since January 2018, when the market was in one longer period of meh growth in the US. "data-reactid =" 16 "> So it's no surprise that stocks ended on a downward trend on Wednesday after Federal Reserve Chairman Jerome Pow He had given a well-prepared presentation to journalists looking for headlines on Wednesday afternoon. The Dow Jones Industrial Average fell 141 points near the lows of the session, breaking a series of very bullish sessions. Large bank stocks such as JPMorgan Chase and Bank of America, which had settled well into Fed Day, had been mixed up. The 10-year US Treasury yield fell to its lowest level since January 2018, as the market gained more million of US growth.

Finding what the bullish mood of the market does not bother is not too difficult. It actually smacks you in the face. The question now is whether the Fed at one fell swoop disturbed the loose environment in which Wall Street was earning most of its time by 2019.

The answer: Maybe.

<h2 class = "Canvas Atom Canvas Text Mb (1.0 em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " A Very Moderate Federal Reserve "data-reactid =" 19 "> A Very Restrained Federal Reserve

Chairman of the Federal Reserve Jerome Powell speaks during a press conference in Washington, Wednesday, March 20, 2019. (AP Photo / Susan Walsh)

The entry into the Fed day was as follows: A patient Fed on the rate hike front would be in the second half this year to accelerate growth. After all, how could the US economy in 2019 not catch fire with interest rate hikes, the labor market remains solid and companies benefit from the Trump tax cuts.

For the cops Powell is unfortunately a dagger heart, maybe too dovish. The Fed not only insisted on the patience of its interest rates and cautious approach to lifting its huge balance sheet, but also lowered its forecasts for growth in the US for 2019 and 2020. It also raised its 2019 unemployment rate forecasts. 2020 and 2021. The points for further interest rate hikes for this year have been removed.

That all strikes form the heart of the story, which has led to a boom this year. In fact, it shows that the Fed is worried about growth prospects for a variety of reasons – tensions in the economy, profit margins, higher oil prices, momentum of the presidential election and so on. Remember that there is obvious concern despite the low interest rates. Hikes will be wiped off the table for the foreseeable future.

Terrible signal to the market, Powell.

Rate Drops in late 2019

Now, some on Wall Street speculate that the outlook for the Powell Fed will have to look like this to lower interest rates later this year. Wait, what?

"The Fed's revised economic forecasts, which now do not imply interest rate hikes this year, were a bit darker than most expected, but we believe their underlying economic forecasts are still too optimistic. We expect economic growth to remain well below the trend in 2019, which is why we believe the Fed's next step will be to cut interest rates, "says US economist Michael Pearce.

" The decision Leaving the Fed's target The benchmark interest rate was expected to remain at 2.25-2.50%, but government bond yields, which declined sharply after the decision, indicate that investors were taken by surprise by the reluctant tone of the attached statement and economic forecasts [Pearce adds]

The Fed not I would like to predict the making of political decisions, at least in public, but the removal of the two 2019 points indicates that they are far more concerned about external risks than we believe that this is justified as a base case, "said Pantheon Macroeconomics chief economist Ian Shepherdson:

Powell s rather restrained tone of voice scares investors? Some say yes, others are not sold. At least Mr Market will be sold first – and today he is more worried about the rally than on Monday.

<p class = "Canvas Atom Canvas Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Brian Sozzi is an editor for Yahoo Follow him on Twitter @BrianSozzi "data-reactid =" 41 "> Brian Sozzi is editor at Yahoo Finance. Follow him on Twitter @BrianSozzi

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