Thursday, April 4, 2019

Investment Perspectives: Economic Breakthroughs, Fed's U-turn, and Inversion Talk

Key Takeaways
  • Attention now turns to potential second-quarter economic breakthroughs in the United States and globally. 
  • Explore a comparison of the Fed's most recent U-turn and past shifts.
  • As inversion talk captured headlines, we examine why it might not be a sign of a forthcoming recession.

In this month's issue:

"Sea Change" Mark Luschini
The interest rate outlook that was released after the most recent meeting of the Federal Open Market Committee (FOMC) — the group that determines the Federal Reserve’s (Fed) monetary setting — surprised investors. Not by keeping interest rates unchanged, that was widely expected, but by the scope of the downward revision in the expectations for future rate changes. While Fed officials have exclaimed their intent to be “patient” on many occasions during the last few months, it turns out the members of the FOMC expect no further rate hikes this year and only one next year. This is a sea change from the forecast as recent as December when those expectations were for at least two this year alone.

"Fed U-Turn Neither Unusual nor Conclusive" Guy LeBas 
Recent swings in Federal Reserve policy stance has offered the opportunity for some colorful commentary titles (Three Steps and No Stumble; Powell Asks: Are We There Yet?; Don’t Make Me Turn this Car Around; and Same Story, Different Market to name the four most recent). String these notes together — even the titles tell a story — and you have a pretty clear idea of the direction of monetary policy.

"Inversion Aversion" Greg Drahuschak 
After finally breaking through the top of a six-month-long trading range, a yield inversion in Treasury paper sent the S&P 500 from a March 21st high of 2854.88 to as low as 2785.02 by March 25th.

You can read the full Investment Perspectives here.