Ahead of FOMC day, Head of Research Tom Lee noted that many investors were viewing the market from the lens of a conventional monetary policy cycle, leading them to expect a hard landing and remain leery of stocks until at least three or four rate cuts by the Fed. Instead, Lee has argued that inflation is the key story arc for equities.

FOMC day was preceded by the Bureau of Labor Statistics May CPI release. “The details were better than expected,” Lee wrote on Tuesday, and likely “good enough to keep the Fed on pause for June and possibly in July as well.” 

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As he noted, ex-shelter, the sticky Core CPI is now at 2.5% 3M SAAR (3-month annualized), which is nearly on target. 

The video in this report is only accessible to members

The Fed’s dot plot appeared to tell a different story – of the 18 FOMC members, 16 saw at least one more hike in this cycle, and a slight majority saw two or more hikes. But, the Fed’s press statement described this month’s pause as a chance for committee members “to assess additional information and its implications for monetary policy.”

After the decision announcement, Fed Chair Jerome Powell said “the U.S. economy slowed significantly last year” while pointing out that “recent indicators suggest that economic activity has continued to expand at a mode...

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