thependulumswings

Friends

I half expected Fed Chair Powell to conduct his post FOMC press conference from an aircraft carrier donning a fighter jacket, while declaring “mission accomplished”. Indeed, the normalization of monetary policy has apparently been achieved – at least for now. Today, the Fed made it clear that they were done raising rates for the foreseeable future. Now, one could interpret their increased dovishness as concern that the economy is under pressure and is likely to slow as the year progresses. Whatever the case, market participants are left to decipher whether this is good for stocks (remember TINA) or is this a capitulation that spells difficult times ahead for equity investors.

As for today, stocks had been weak before the Fed statement due to President Trump’s China tariff comments, then rallied after the release of the statement, only to weaken once again in the last hour of trading. By the close, the Dow Jones Industrial Average was down 141 points to finish the day at 25,745. The S&P 500 was down 8 points to close at 2,824. Gold was up $7 to trade at $1,314 per ounce, while oil was up $1.09 to trade at $60.12 per barrel WTI. Bonds may have been the bigger story today with the 10 year Treasury note yield falling to 2.53%. Remember, the 3 month yield is 2.46%, so the yield curve is virtually flat, and getting flatter.

Another disappointing earnings report from Federal Express yesterday may be confirming a global slowdown, which would support the Fed’s more dovish stance. Anyway, the market now has the Fed firmly in a dovish stance which likely removes that headwind for stocks for some time. But, did the Fed flash an economic warning sign that would become a different headwind for stocks? Hmm.

Have a nice evening everyone.

Jim