MAKE OR BREAK WEEK (FOMC recap): Fed does a "make" but the market does a "break." Pause is now the base case. Array ( [cookie] => c1ad16-41b0f5-86a520-f92638-32323b [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 2 [max_usage_crypto] => 2 [lock] => 1 [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 208701 [user_id] => [reason] => [method] => ) 1 and can accesss
The Fed's FOMC announced its May rate decision deciding upon a +25bp hike and a shift towards an evenutal pause by modifying the policy statement "in determining the extent may be appropriate" (removing "the committee anticipates that some additional policy firming may be appropriate").
- FED ACTION IS A "MAKE": In essence, this was a "dovish" +25bp rate hike as the Fed believes rates are sufficiently restrictive. But equities saw a sizable sell-off. I listened to the press conference twice, and Powell stated multiple times that the FOMC sees policy rates "about near" where they need to be to contain inflation. And any further adjustments would be in reaction to incoming data, aka data dependence. This policy rate is essentially at the FOMC's target rate from its March "dot plot" (SEP, or Summary of Economic Projections) of 5.1%. And they saw further tightening delivered from QT (balance sheet unwind) and from the fallout from the regional bank crisis.
- EQUITY MARKET REACTION IS A "BREAK": Initially, this "dovish take" was the market's initial reaction as the S&P 500 rallied +30 points (+0.70%) peaking at 4,148 (2:40pm ET). But soon thereafter, shed 1.5% and closed down for the day at 4,091. There were 5 points during the press conference (see below) where the S&P 500 responded negatively to Powell's statement, during the Q&A session.
- WHAT DID POWELL SAY? 3 COMMENTS TRIGGERED WEAKNESS: And we labeled statements that were made in proximity to these market sell-offs. This is not to say those exact words triggered the market reaction, but you get the idea. This is what was being said at each point in the press conference.
- 2:40PM ET “A decision on a pause was not made today”
- 3:06PM ET "inflation (not) come down...quickly.... not...appropriate to cut rates”
- 3:18PM ET “Support for 25bp rate...VERY strong…. did talk about pausing, but not...this meeting” - In other words, the apparent triggers for market weakness were in reaction to commentary around a "pause" -- one view is that equity markets wanted a clearer statement about a pause, not a conditional view about data dependence. And Powell also multiple times expressed his view that he does not see a recession as the base case, even if Fed staffers believe this.
- BOND MARKET VIEWED DOVISHLY: Overall, bond markets took the Fed comments dovishly, to the extent that interest rates 12M and beyond (2Y, 5Y, 10Y, etc) fell during the FOMC press conference. The fact that interest rates actually ticked down is a contrast to his expectations that "rates would be held at this level for an extended period of time." As listed below, none of the US rates beyond 3 months even remotely reflects the Fed's statement (yields are lower).
- Fed funds 5.125%
- UST 3M 5.181%
- UST 12M 4.634%
- UST 2Y 3.805%
- UST 10Y 3.336% - Even bond market volatility (MOVE Index) fell yesterday. So the overall reaction in the bond market was benign, relative to the weakness seen in stocks. Unfortunately, regional banks fared poorly as well. Again, seems that the Fed might be amplifying the credit tightening associated with balance sheet issues at regional banks.
- FUTURE INFLATION SOFTER (OUR VIEW): While investors were seeking more clarity, Powell also explained his reasons for not being crystal clear of a pause. Foremost, he noted that inflation remains too high and that inflation trends are volatile and even the key category "core services ex-housing" has been unchanged, per his view. But as we noted in our PCE commentary last week, the trend in MoM of Core services ex-housing visibly softened. We will have a better sense when April CPI is released next week. Perhaps this is when investors will see "pause" as not only the base case, but a sustained case.
- LABOR MARKET (TO SOFTEN, OUR VIEW): Similarly, Powell noted that he saw the labor markets as very strong currently. That is true when looking at unemployment rates. Yet, at the same time, he similarly noted that he doesn't see strong labor as the "root cause" of inflation. In other words, while he would like to see a cooling of labor markets, he is not seeing it as essential to quell inflation. This Friday's employment report for April will be telling, but as we highlighted yesterday, DeepMacro sees a 10% miss.
- REGIONAL BANK TIGHTENING (IF WORSE, FED PAUSES): On the regional bank crisis, the Fed stated that they are not sure to the magnitude of the impact of the credit tightening associated with the regional bank crisis. And some color would be available when the senior loan officer survey is released on 5/8. But at this time, it is best to view that regional bank impact as doing some tightening, but "it's quite impossible to have a precise estimate."


Become a Member To Access FS Insight Research
FS Insight gives individual investors access to Tom Lee's research, previously only available to banks and hedge funds.
|
|||
Join Now |
|
|||
Join Now |
What's included in your FSI Membership?

Thomas J. Lee
Head of Research
Type | Publication | Mon | Tue | Wed | Thu | Fri | Monthly | |
---|---|---|---|---|---|---|---|---|
Reports |
First Word The best market research out there -- on a near-daily basis. |
![]() |
![]() |
![]() |
||||
Intraday Alerts These are released periodically after crucial market developments. |
Real-Time | |||||||
Weekly Roadmap Weekly summary of market events and updates on our key theses. |
![]() |
|||||||
Webinars & Videos |
Macro Minute Video Daily video commentary on market conditions & key events. |
![]() |
![]() |
![]() |
![]() |
|||
Outlook Webinars We host over 12 LIVE webinars per year with our research team and high-profile special guests. Incredible value and market insights! |
Yearly | |||||||
Granny Shots Webinars |
![]() |
|||||||
CEO Interview Webinars | Quarterly | |||||||
Appearances Archive | Real-Time | |||||||
Allocation Tools |
"Super Granny" Shots Stock List Granny Shots we expect to tactically outperform and underperform. |
![]() |
||||||
Granny Shots Stock List Thematic investment stock picks that aim to outperform the S&P 500. |
![]() |
|||||||
Sector Allocation A sector allocation strategy that is designed to outperform the S&P 500 while taking minimal risk. |
![]() |
|||||||
Market Alerts |
⚡️FlashInsights Real-time market commentary about macro and crypto events from our research heads. |
![]() |
![]() |
![]() |
![]() |
![]() |
Real-Time |

Mark L. Newton
Head of Technical Strategy
Type | Publication | Mon | Tue | Wed | Thu | Fri | Monthly | |
---|---|---|---|---|---|---|---|---|
Reports |
Daily Technical Strategy Daily commentary on market trends and short term opportunities. |
![]() |
![]() |
![]() |
![]() |
![]() |
||
Weekly Roadmap Weekly summary of market events and updates on our key theses. |
![]() |
|||||||
Webinars & Videos |
Daily Technical Strategy Daily commentary on market trends and short term opportunities. |
![]() |
![]() |
![]() |
![]() |
![]() |
||
Live Technical Analysis |
![]() |
|||||||
Outlook Webinars We host over 12 LIVE webinars per year with our research team and high-profile special guests. Incredible value and market insights! |
Yearly | |||||||
Appearances Archive | Real-Time | |||||||
Allocation Tools |
Newton's Upticks Stock List Technically derived, intermediate-term picks of attractive risk/reward opportunities from the S&P 500. |
![]() |
||||||
Market Alerts |
⚡️FlashInsights Real-time market commentary about macro and crypto events from our research heads. |
![]() |
![]() |
![]() |
![]() |
![]() |
![]() |

L. Thomas Block
Washington Policy Strategy
Type | Publication | Mon | Tue | Wed | Thu | Fri | Monthly | |
---|---|---|---|---|---|---|---|---|
Reports |
US Policy Weekly update on developments in Washington DC and how they may impact Wall Street. |
![]() |
![]() |
|||||
Weekly Roadmap Weekly summary of market events and updates on our key theses. |
![]() |
|||||||
Market Alerts |
⚡️FlashInsights Real-time market commentary about macro and crypto events from our research heads. |
![]() |
![]() |
![]() |
![]() |
![]() |
Real-Time |


Sean Farrell & Crypto Team
Type | Publication | Mon | Tue | Wed | Thu | Fri | Monthly | |
---|---|---|---|---|---|---|---|---|
Reports |
Market Update Stay on top of the crypto markets with macro commentary, technical analysis, and the most relevant news. |
![]() |
![]() |
![]() |
![]() |
![]() |
||
Weekly Strategy Weekly summary of market events and updates on our key theses. |
![]() |
|||||||
Funding Fridays Are you looking for investment opportunities in the crypto space? We explore early-stage crypto opportunities in this note about where the smart money is being invested! |
![]() |
|||||||
Crypto Concepts We periodically provide in-depth research on the leading protocols, companies, and funds shaping the crypto ecosystem. |
![]() |
|||||||
Liquid Ventures A recurring research note focused on delivering unique insights into high-risk investment opportunities within the crypto ecosystem, primarily centered on early-stage or small-cap tokens. |
![]() |
|||||||
Deep Research We periodically provide in-depth research on the leading protocols, companies, and funds shaping the crypto ecosystem. |
Quarterly | |||||||
Weekly Roadmap Weekly summary of market events and updates on our key theses. |
![]() |
|||||||
Webinars & Videos |
Outlook Webinars Ongoing webinars exploring crypto opportunities, in depth research, and exclusive research offerings from our team of analysts and leading cryptocurrency firms. |
Yearly | ||||||
Crypto Comments |
Daily Technical Strategy From Bitcoin, Ethereum and Solana to other coins, our Head of Technical Strategy highlights important price movement to help give you an edge. |
![]() |
||||||
Allocation Tools |
Crypto Core Strategy A powerful tool designed to help crypto investors build a crypto portfolio that outperforms the industry’s king – bitcoin – regardless of market conditions. |
![]() |
||||||
Market Alerts |
⚡️FlashInsights Real-time market commentary about macro and crypto events from our research heads. |
![]() |
![]() |
![]() |
![]() |
![]() |
Real-Time |

FS Insight Research Team
Type | Publication | Mon | Tue | Wed | Thu | Fri | Monthly | |
---|---|---|---|---|---|---|---|---|
Reports | First to Market |
![]() |
![]() |
![]() |
![]() |
![]() |
||
*Earnings Daily This note provides investors with a myriad of useful metrics to measure the progress of earnings season |
![]() |
![]() |
![]() |
![]() |
![]() |
|||
Signal From Noise Highlights timely market themes and sectors with corresponding stocks, cutting through the day-to-day market “noise” for a distinct perspective. |
![]() |
|||||||
Community Questions We gather your inquiries and answer them in the most scalable way. Hear directly from our research principals! |
![]() |
|||||||
FS Insight Academy Our main goal is to make you a better investor! This series will guide you through key financial concepts and topics in an understandable way. |
![]() |
|||||||
Webinars & Videos |
Free Macro Webinars Live webinars and Q&A with our research team and high-profile industry leaders. |
Quarterly | ||||||
Free Crypto Webinars Live webinars and Q&A with our research team and high-profile industry leaders. |
Quarterly |
*Daily reporting during each quarterly earnings season.