Gloomy Fed Outlook Rallies Markets

Today the world’s most influential banker (Fed Chair Powell) testified to Congress about global economic uncertainties including trade tensions, tariffs, and overall weakness in the global economy. Market reaction? The S&P index rallied to 3,000, it’s all time high. Why? We are back to the contrarian new cycle as bad news equals the return of the punchbowl (rate cuts). Powell’s testimony along with St Louis Fed President Bullard’s recent comments regarding a half point “insurance” move against global growth slowing means markets have priced in at least a half point decrease in the 2nd half of 2019. As oil prices spiked on global tensions (US/Iran) and weather (storms off the coast of Mexico), Powell expressed concern over “persistent weak inflation”. He also waved off last week’s positive US jobs report. For our borrowers, the news is good for now: indices (Treasuries and LIBOR) continue to drop, spreads are steady and lots of liquidity.

Don't Miss a Fact,
Sign Up for FINfacts!

FINfacts is a weekly newsletter highlighting recent financings and economic insights.

Subscribe Here