The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Fed non-drama
The Fed didn’t change rates, as expected and the Chairman didn’t say anything to stir up the markets, as expected. The S&P opened about +20 this morning and printed new all-time highs (7002) shortly thereafter. The index gave it all back by 11:30 AM and then hovered down slightly until the FOMC decision. The index recovered to flat and stayed near that level for the remainder of the day. The yield curve did very little. The Dollar strengthened significantly, on the heels of comments from Treasury Secretary Scott Bessent. Capital flow was higher at 117%, indicating *some* combination of factors were more motivating than usual today.
Barring an economic shock, the Fed is now in a holding pattern. The market only expects a 25 bip cut around July and only expects 45 bips of total easing for the rest of the year. This will all change, for certain, when a new Fed Chair is announced and then confirmed. At the moment, the market does not expect a new Chair to disrupt existing policy. There’s no sense in guessing what’s coming however (in my opinion). Whoever Trump nominates, the market will quickly express its opinion. And even after the market speaks up, and the candidate is confirmed, that person could always surprise the market, positively or negatively, once they hold the position.
My point being, until we know the person, we don’t know what’s coming. And even after confirmation, we still won’t know how the Chair will act until their first FOMC meeting. There’s no sense worrying or celebrating right now.
Moving along, we’ve got earnings season, which is getting no respect. The market has not characterized the season as either good nor bad. We continue to wait for something that allows the market to latch on to a narrative. Microsoft, Meta, and Tesla announce tonight. Maybe they are the catalyst.
One other observation. This is a sneaky bull market so far. The S&P is up 1.9% for the month and small caps are up 6.9%. The sectors of energy, materials, and consumer staples are up 11%, 10%, and 7% respectively.
We haven’t had big rip-roaring rallies, just price action that resembles 2 steps forward and 1 step back. The rally has been broader than last year too.
Is this a good sign or bad… or insignificant? I’m not sure but it’s different.
See you tomorrow.
-Mike
Visdom Market Commentary
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