On Wednesday July 31, 2019, the Federal Reserve lowered interest rates for the first time since the “Great Recession” of 2008. The chairman cited that the quarter-point rate cut was made in order to help stave off the possibility of an economic downturn.
Stocks, however, reacted poorly as the chairman also made sure to point out that this is not the start of a trend – meaning don’t count on future rate cuts.
Global growth was cited as the most important indicator followed closely by inflation.
The market quickly dropped by over 400 points, rebounded by 200 points and then began to stabilize at around the negative 200 point mark.
Markets were tilted to an extremely dovish outcome – Powell failed to deliver.
Bank stocks rose initially on the higher interest rates as analysts were pricing in multiple rate cuts and the fed did not deliver. Look for stocks like BAC, JPM and USB along with the XLF ETF to rise in the coming weeks.
July 31 was the worst day for the DOW since May 31, 2019.
What we know for sure is Chairman Powell cut rates as a supposed “insurance” cut. Powell seemed to dig himself into a hole during his press conference.
The dollar is now sitting near two-year highs.
Powell noted that he is looking at factors like unemployment along with global trade tensions.
The market is acting as though the fed met consensus estimates, but disappointed on the guidance. No one in their rational mind thought we’d get any more than a quarter point cut, but we were hoping Powell would be a little more clear on what is to come.
The market is up over 20% for the year…it was time for a little haircut.
We saw the two dissents from the fed board. The most we’ve ever had. There is a big contingent at the fed that doesn’t want to cut rates. I really think they should have gone down .50 and am not a fan of the yield curve.
The way I look at stocks has not changed. I listened to the whole conference call. There is no upside for Powell really having that conference and he ended up stumbling all over himself.
No asset class is more attractive than equities right now, and I’m still staying the course.