Wednesday, May 1, 2019

Quick Comment on Today's Action

The Fed left rates unchanged and, in their official statement, along with Powell at the presser, gave an overall upbeat assessment of general conditions. Powell stated that, in the committee’s view, the lower than expected inflation of late is transient and will likely not persist for too long going forward. I entirely agree.

While Powell was fielding questions a headline flashed that said a deal with China will happen next Friday. The accompanying article stated that some of the 10% tariffs on $200 bill of goods will likely remain as well as all of the 25% tariffs on $50 billion. The fact that an overwhelming rally on the headline didn’t ensue speaks to the headwind of existing tariffs, the fact that the market didn’t completely fall apart speaks to current trader ambiguity/confusion on the subject.

The fact that stocks sold off on Powell's inflation comments speaks to what I wrote this morning:
"The market’s reaction to today’s Fed announcement will be telling in terms of the extent to which equity traders are actually counting on a rate cut(s) later in the year. If indeed that sentiment is at all prevalent, I strongly suspect they’ll be disappointed."
Also wrote:
"...while economic conditions aren’t what they were a year ago, they’re definitely okay, which is definitely what we should hear from the Fed today."
The Fed's action (lack thereof) and commentary was right on the money! 

I'll circle back with more soon...

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