The Fed will disappoint the stock market even if it reduces rates in September

Copyright © HT Digital Streams Limit all rights reserved. The US chairman of the Federal Reserve Jerome Powell. (Lying Photo: Reuters) Summary The Fed will disappoint the stock market, even if it reduces the rates in September. The stock market needs a cut in September to justify its lofty level. The S&P 500, at just over 6400, is up 10% this year after hit records this week. Of course, part of the rally stems from Big Tech’s excellent earnings season – which has given investors the confidence that the entire market’s growth story could continue. But the underpinning of the optimism for technology and other sectors is expected that the Fed will lower the federal funding figures at the September 16-17 meeting. But even if the Fed delivers a rate reduction in September-the Fed Funds Futures Market allocates a probability of 85% of a quarter-percent rate cut, Jerome Powell can still offer a hawkish view. In other words, the Fed can remain focused on fighting inflation and an indication of a plan to keep rates relatively increased. While markets are aggressively at a rate of September, the Fed is much less likely to impose a series of extra cuts afterwards. This means that investors should not bet too much on shares now: Hawkish messages at the September meeting could cause a broad withdrawal from the market. The Fed is likely to hit a hawkish tone soon, “a development that is not priced with stock heights,” writes Tom Essaye of Sevens Report. This is because the Fed’s preferred meter of inflation, the personal consumer expenditure index, rose 2.6% annually in June, above the 2% of policy makers. Economists expect PCE data to show later this month that inflation remained at that rate of 2.6% in July. Lowering too quickly can hinder enough consumer demand and inflation to impede the Fed’s purpose. The Fed must also face rates, which recently raised the cost of businesses faster than consumer prices. This could force companies to charge more for their goods and services, increasing consumer prices even more. “Inflation [is] Hide in the light, “writes the main investment strategist of Wolfe Research, Chris Senyek, who expects a false surprise next week.” This week, the Fed’s annual monetary policy symposium in Jackson Hole, Wyoming. A greater probability would have that businesses deliver the current expectations.