The Federal Reserve cut their interest rate target yesterday by a quarter point, and the stock market fell about 1%. The cut was expected over the last couple weeks, and the market seemed excited about it, but now that it has happened, it feels like no one is satisfied.
Such is the ambiguity that comes with watching what the market does on a daily basis.
After a sour end to 2018, investment performance has been way up in 2019 (+19.5% S&P500). The turnaround happened early as the Fed promised no more interest rate hikes this year and no more than one in 2020. That was enough to quell concerns that had resulted in a inverted bond yield back in March.
Now with a rate cut, perhaps people are suddenly concerned that the Fed is viewing the global economy and trade war as more serious than expected? At least enough to cause the first cut in rates since 2008? Or, were they hoping for an even bigger rate cut – or additional rate cut guidance for the future?
The stock market is a strangely emotional machine and I don’t think in the short-term it can be easily understood. Even when the Fed does what Wall Street expects, the result can be the opposite of what one would think. Better to be a buy-and-hold investor than to try to read anything in the everyday Wall Street ambiguity.
Have A Great Weekend!