Latest / Markets with Megan: A Quick Financial Markets Update / Breaking Down the Bullish Boost: Federal Reserve Meeting Recap | Episode 112 | 03-20-2024
Transcript
- 0:02Speaker 0: The Federal Reserve met today and while they kept interest rates unchanged, they delivered some for the bulls and not just some.
- 0:07Speaker 0: They delivered a lot for the bullish side of the market.
- 0:10Speaker 0: I'm Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today on Wednesday March 20th.
- 0:16Speaker 0: The Federal Reserve met in their regularly scheduled meeting today and it was expected that they would leave interest rates unchanged.
- 0:24Speaker 0: But Federal Reserve Jerome Powell in the press conference and even the statement from the Fed, delivered a much more dovish side of his views that helped that bull market side of the case, and let me explain what I mean.
- 0:40Speaker 0: So, while they kept rates unchanged, what the market was looking for were the comments and then those dot plots.
- 0:46Speaker 0: The comments really were a bit more dovish than we had anticipated and delivered for those bullish investors in the market.
- 0:54Speaker 0: What that means is they mentioned that the rate has likely peaked.
- 0:58Speaker 0: They still think there's basically three interest rates, for that will be expected at some point in 2024.
- 1:05Speaker 0: They basically downplayed and this is where I say that they delivered a bit more dovish and really helped out the bullish side of the market because they downplayed the recent elevated inflation indicators.
- 1:16Speaker 0: We think that might be a little bit of a mistake, but again, time will tell.
- 1:20Speaker 0: We're not going to look at one month as a trend, but there has been some indications that inflation is much more stubborn to get down to where they need it to be.
- 1:28Speaker 0: They didn't make any official comments or dates about the balance sheet.
- 1:34Speaker 0: What they did mention was that it would be appropriate to reduce the runoff at some point soon.
- 1:39Speaker 0: They did mention that risks towards meeting inflation and their employment goals are moving much more in balance.
- 1:47Speaker 0: Let's talk about those dot plots that also get released with this.
- 1:50Speaker 0: As I mentioned, they expect three interest rate cuts this year, but there was one loan committee member that wants four interest rate cuts this year.
- 2:00Speaker 0: The changes that they made were the biggest changes in GDP.
- 2:04Speaker 0: Their expectation in their last meeting was for 1.4% GDP in 2024, but they bumped that up to 2.1%.
- 2:13Speaker 0: They're more optimistic from the economic standpoint.
- 2:16Speaker 0: They did reduce the unemployment rate expectation from 4.1% at their last meeting for it to be 4% this year.
- 2:25Speaker 0: They did bump up their core PCE inflation rating from 2.4% at their last meeting for it to be 2.6% this year.
- 2:34Speaker 0: Upgraded growth modestly upgraded PCE.
- 2:39Speaker 0: The reason the market has rallied so much on this is because again, they're saying inflation may be a little elevated, but they're not worried about being able to meet their 2% inflation target.
- 2:50Speaker 0: They're still looking at 2% inflation to be met in 2026.
- 2:55Speaker 0: Again, they won't wait to cut rates until we get to that exact 2% level.
- 3:00Speaker 0: But as long as we're trending that way in a consistent manner, they will cut interest rates.
- 3:05Speaker 0: The markets are loving these comments from the Fed.
- 3:07Speaker 0: Strong rally today.
- 3:09Speaker 0: We'll get some more data this week leading indicators, some more information from the housing side, so we'll be back with more economic data.
- 3:16Speaker 0: If you have any questions or comments, please feel free to reach out to podcasts at Verdence dot com.
- 3:22Speaker 0: I apologize about that.
- 3:23Speaker 0: Thank you very much, thank you.