I watched the Q&A with US Fed Chairman Powell after the rate rise decision, and my impression was that he wanted the market to know that he will be responsive to incoming data over the next few months.
If inflation drops rapidly as the market expects, the Fed may bring their dot plots more in line with market thinking.
But the Fed needs to see inflation coming off the boil in the non-housing services sector before they stop raising rates.
It was a slightly less hawkish stance than many expected, and stocks and bonds rallied as a result.
The US 10-year bond yield chart confirmed a monthly sell pivot last month, which hints that rates could keep falling.
Whether or not that will be bullish for stocks is uncertain because if growth turns down, earnings will be hit, and falling rates won’t save stocks in that situation.
The S&P 500 is at a crossroads because it’s nudging up against serious resistance within a long-term downtrend. A slight rally from here could set off a chain reaction that could see the S&P 500 jump 5–10%, but if the selling returns soon, the picture can look bearish in a flash.
I set out all of the levels for you to keep an eye on in the video above, so click on the picture and check it out.
Until next week,
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Murray Dawes,
Editor, Money Weekend
