Equities Rise With Hopes Of Lower Rates

Nearly all equity sectors were positive last week as geopolitical concerns eased.

Futures for September Fed Funds Rate have risen to a 73% probability of a rate cut by the end of the 3rd quarter. There appears to be dissention in the ranks as FOMC members Bowman, Waller, & Goolsbee have recently made dovish comments that it's time to begin cutting rates. Those three members, in particular, have been hawkish for quite some time. The last time a Fed Chairman "lost the room" was in 1986. It will be interesting to see how this plays out.

Meanwhile, the Fed's favorite measure of inflation, the PCE Price Index, was muted once again last month.

Friday's report showed inflation at +0.1% for May, which was in-line with expectations and the same as April. Fed Chairman Powell has repeatedly stated that he expects inflation to rise with tariffs. The U.S. continues to take in record revenues from tariffs (+$96 billion YTD) and there has been little evidence of inflation rising. The question now becomes, is there a policy mistake evident in the Fed's current stance on interest rates? It's a shorter week of trading on Wall Street this week. Barring some external event, trading volumes should be light this week.

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