Dovish Fed & Tame Tariff Talk Ease Markets

Most equity sectors were positive last week as the market seemed to like what it heard from the Fed.

Volatility declined last week as the Fed provided some dovish language and fears over tariffs subsided. VIX futures going out to May and June show expectations of lower volatility ahead. The Fed left interest rates alone, but pointed to the possibility of two more rate cuts this year. The Fed remains confused on projections for 1st quarter GDP as the Atlanta Fed is projecting negative Q1 GDP, but both the New York Fed and St. Louis Fed projections are positive 2.7% and 2.3%, respectively. More than likely, there is an issue with the Atlanta model that is accounting for Net Exports incorrectly. Language from the Trump administration this morning points to lower than expected tariffs going into effect on April 2nd, which has markets responding with glee.

There seems to be further confusion at the Fed as Chairman Powell stated on Wednesday of last week that, "Inflation has started to move up."

Yet, the Cleveland Fed, which publishes an Inflation "Nowcast" for the next month, is showing 0% increase in CPI for March and only a 0.03% increase in PCE (the Fed's preferred measure of inflation) for March. In addition, the highly-publicized price of eggs has dropped for the past 5 consecutive weeks, falling from a high of $8/dozen to just over $3/dozen. That begs the question, what inflation is Mr. Powell referring to exactly? The book is not yet written on the latest equity correction, nor is it written on the current bull market cycle. If the current bull market ended today, it would be the 2nd lowest return for a bull market since 1949. In addition, an end to this bull market would mark the 3rd shortest bull market over the same time period. The best course for investors is to stick their financial plan/investment strategy and ignore the noise about tariffs and inflation.

---

Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.

Past Performance does not guarantee future results.