Fed Rate Cuts When Stocks are at All-Time Highs
Last week, Fed Chief Powell all but green-lighted a rate cut at the July 31st Fed meeting and seemed to suggest additional cuts may be forthcoming.
The expected rate cut is coming at a time when the Dow1, the S&P 500 Index2 and the NASDAQ3 are at all-time highs (a/o 7/15/19 – MktWatch data).
Have central bankers cut the fed funds rate when stocks are at a record high? You bet they have.
The Federal Reserve is gearing up for July 31st rate cut and possibly additional cuts following Fed Chief Jerome Powell’s testimony before two Congressional committees. Last week, Powell didn’t explicitly say a rate cut is forthcoming. He’d never go that far. But his remarks opened the door pretty wide at the upcoming July meeting.
Q2 earnings season is gradually getting underway.
- Early reports are impressive relative to expectations (Refinitiv).
Analysts project Q2 S&P 500 profits will decline 0.1% from a year ago. Revenue is projected to rise 3.4% (Refinitiv a/o July 9; forecasts subject to change).
- Revenue growth is forecast to outpace profit growth for the second-straight quarter. That means margins are coming under pressure.
- Look for commentary on the flare-up in trade tensions.
- A strong dollar is set to chip away at sales of multinationals, as overseas sales must be translated back into a stronger dollar.