Pre-Market Plan [9/19]: Fed Starts Rate Cutting Cycle with Large 50BP Cut
Good Morning -
The Fed followed the Bond Market’s cue for a 50BP cut, and Chief Powell gave the market what it was looking for in the September FOMC to defend any potential fallout in the jobs market. Millions of consumers now will see immediate relief in consumer credit card APRs, home equity loans, and lower borrowing costs. The hope is that businesses will begin to hire robustly again and that will cause a re-acceleration in the economy from its current slow-growth mode.
As for markets, I shared with Members 2 views - one before FOMC and one after.
Before FOMC, I believed that a 50BP cut could result in a reversal from any temporary rally to serve as a trap. That has since happened.
After the FOMC yesterday, I sent the following note to the Community that the path for stocks remain constructive, though volatility will always persist:
As for the forward outlook, stocks are expensive but they are expensive for a reason (there is no real serious alternative). Cash now yields .5% less effective immediately, and the appeal of Bonds is questionable if inflation reignites (we are entering a monetary easing cycle after all). Real Estate continues to be out of reach for most first time homebuyers, and a 50BP cut isn’t likely to unfreeze the housing market out of its current funk.
More strategy commentary for Members in today’s Daily Plan.
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