There's a more important force than the Fed driving the stock market 💪
The Fed's next move might not be that big of a deal for prices 🤷🏻♂️
The Federal Reserve announced it would keep its benchmark interest rate target high at a range of 5.25% to 5.5%.
At the conclusion of its monetary policy meeting on Wednesday, the Fed also maintained its expectation for the equivalent of three 25-basis-point rate cuts in 2024. However, the central bank’s new “dot plots” imply fewer rate cuts in 2025 and 2026 than what it previously forecast after the Fed’s December meeting.
Since the beginning of the year, futures traders have been paring back their expectations for Fed rate cuts. And yet stock prices and valuations have been trending higher. The S&P 500 closed at a record high 5,184.57 on Tuesday, and it rose to new intraday highs on Wednesday afternoon.
The fact that hawkish developments in the outlook for Fed rate cuts isn’t causing prices to fall suggests the next move on interest rates may not be that big of a deal for the stock market. For more on this argument, read: Whether or not the Fed cuts rates is not the right question 🔪.
If the evolving outlook for Fed policy isn’t driving stock prices, then what is?
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