Thursday, 01 August 2019 09:09

The Fed Just Shocked Markets, and That May Be a Good Thing

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The Fed meeting yesterday was not what everyone expected. While the central bank did cut rates 25 basis points, the commentary was far from what investors expected. The attitude on the Fed had turned so dovish prior to the meeting that some thought Powell might cut rates by 50 bp. The whole meeting took a different course, with the Fed saying this was just a “mid-cycle adjustment” and refusing to commit to a further cutting plan. This upset markets, with indexes all diving over 1%.

FINSUM: We think this was smart from the Fed and ultimately good for markets. It left things more uncertain as to policy and direction, which means stocks will trade more on fundamentals. This reinstates the “wall of worry” that always seems necessary to build bull markets.

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