Last week, we looked at how stocks respond to rate cuts. This week let’s look at how the Fed may frame its rate decision and outlook.
- A rate cut following Wednesday’s meeting can’t be ruled out, but odds are low.
More likely – the Fed emphasizes its flexibility and likely opens the door to possible rate cut(s) in the second half of the year.
The Federal Reserve’s two-day meeting concludes on Wednesday. A recent shift in the Fed’s stance, hinting it is open to rate cuts to support the economy, has aided investor sentiment.
The broad-based S&P 500 Index posted its first weekly advance in five weeks. While some of the gain can be traced to short-term oversold conditions, the trigger came from expectations the Fed may be gearing up to cut interest rates.
First China, now there is the threat of steep tariffs on Mexican imports.
Impact: Stock market volatility and falling Treasury bond yields, as investors seek the safety of Treasuries (bond prices, yields move in opposite directions).
Odds of a recession by year-end remain low but have edged higher amid trade tensions that are slowing global trade flows and dampening business confidence.