Latest / Markets with Megan: A Quick Financial Markets Update / Big Market Misread? GDP Miss + ISM Drop | S2 E039 | 05-07-25
Transcript
- 0:00Megan Horneman: No big surprises from the Federal Reserve today.
- 0:02Megan Horneman: It's Wednesday, May 7th, and this is Markets with Megan.
- 0:05Megan Horneman: If you like this podcast, please subscribe.
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- 0:11Megan Horneman: But we wanted to come today to give you a recap of what we heard from the Federal Reserve today when they met in their monthly meeting and what they decided to do was leave interest rates unchanged, and this was no surprise.
- 0:22Megan Horneman: The markets had been anticipating they would stay on hold again in May.
- 0:27Megan Horneman: The vote was unanimous as well, and that's not really a big surprise.
- 0:31Megan Horneman: Some of the comments that they made, though, that changed from the last month, were that they see the risks higher for both unemployment and higher inflation.
- 0:40Megan Horneman: They also said that the uncertainty about the economic outlook has actually increased further, so that's a little bit different from their prior meeting.
- 0:48Megan Horneman: Some of the other things that they mentioned that were relatively good was that unemployment has stabilized, and we saw that with the relatively good unemployment report that we got this past month.
- 0:58Megan Horneman: The labor market remained solid.
- 1:01Megan Horneman: That was actually their notes.
- 1:02Megan Horneman: They said that economic activity did expand at a solid pace as well, and they acknowledged that swings in the imports affected economic data.
- 1:12Megan Horneman: And what do they mean by that?
- 1:14Megan Horneman: When we saw the GDP report come out, we saw that a big surge in imports actually caused that decline in GDP for the first time since 2022.
- 1:23Megan Horneman: So how are the markets reacting to that?
- 1:26Megan Horneman: Well, as the Fed's statement came out, it also coincided with some comments that Trump made on not easing up on China in order to get talks moving.
- 1:35Megan Horneman: So we've seen equities lose some steam and when you look at the Fed's report, their comments were relatively hawkish.
- 1:41Megan Horneman: They are concerned about the economic outlook, but they're also very concerned about inflation and they mentioned that the labor market remains solid.
- 1:50Megan Horneman: Their mandates is an inflation and the labor market.
- 1:53Megan Horneman: So if inflation risks are higher and the Fed thinks the employment market is solid, then you could see the Fed stay on hold longer than some are anticipating.
- 2:03Megan Horneman: Yields are lower for the bond market, and that's surprising, given it was a hawkish statement.
- 2:07Megan Horneman: But bond markets or the investors are probably focused more on the concern about the economic outlook that the Fed had mentioned the futures market.
- 2:16Megan Horneman: When you look at the Fed funds futures market and what that's pricing in for future rate cuts, the market is still looking for at least two to three rate cuts this year Now going forward, we'll have the Chairman, jerome Powell will speak today in a press conference.
- 2:31Megan Horneman: That's a little bit later this afternoon, and then on Friday there's several Fed speakers who come out.
- 2:36Megan Horneman: So while this statement does tend to get some initial market reaction, we also do see some impacts from press conferences typically, and then when we get additional speak from some of the Federal Reserve officials, they can move the markets as well.
- 2:50Megan Horneman: That's all we have today.
- 2:52Megan Horneman: If you want a history of our podcast, you can go to marketswithmeganfm.
- 2:55Megan Horneman: Thank you.