02 May NO CLEAR INDICATIONS REGARDING THE NEXT MONETARY POLICY MOVE
Monetary policy makers gave no clear signal that their next move would be a hike or a cut, or that any adjustment should be expected at their next meeting in June. Officials slightly upgraded their assessment of the economy saying “economic activity rose at solid rate while the labor market remained strong.”
The Committee further stated inflation is below targeted level and even though wages are rising at the greatest pace of this expansion “remain vexingly low in current conditions.”
Equities fell following the statement as it dampened market expectations that the next case would be lower.
A long time adage is the markets hate uncertainty. The FRB Chair’s sentiment of no clear signal regarding the direction of monetary policy is extremely opaque. In view for years equities have been spooned fed by the FOMC and this new narrative has radically changed the environment.
What will be the ramifications?
I think the Committee has just resurrected the need for macroeconomic and geopolitical analysts, people that can develop a thesis for investing decisions. It may be the first challenge to the passive model that has dominated the financial markets for many years.
Twenty years ago the mantra was “prudent portfolio” or a portfolio crafted upon possible expectations. Ten years ago it started a transition to “prudent investment” or mono variable emphasizing cost and passivity, a mantra that today is all to dominating.
What will happen today? Will all delay any decisions until tomorrow’s employment report?
Last night the foreign markets were mixed. London was down 0.13%, Paris down 0.52% and Frankfurt up 0.03% China was up 0.52%, Japan was closed for a holiday and Hang Sang up 0.83%.
The Dow should open mixed as attention is now focused upon earnings, trade and tomorrow’s jobs data. The 10-year is off 5/32 to yield 2.53%.