“The most perfect technique is that which is not noticed at all.” — Pablo Casals
Good evening,
The focal point of this week’s trading was the March 19-20 meeting of the Federal Open Market Committee (FOMC). By now, the phrase “dot plot” has essentially become part of the public vernacular, and with markets once again correctly anticipating that the Fed would keep rates unchanged at 5.25%-5.5%, investors zeroed in on the dot plot and Summary Economic Projections (SEP) immediately after the rate decision was announced.
Markets had been apprehensive heading into the meeting, and Fundstrat Head of Research Tom Lee told clients that, based on the conversations he was having, many investors remained skeptical about equities as an asset class and expected the Fed to turn hawkish on Wednesday.
However, despite recent hotter-than-expected data, Lee argued that the Fed would acknowledge that inflation was still clearly on a downward trajectory, thus remaining dovish, and he suggested that, once this became clear, pre-meeting sentiment, expectations, and positioning would help spark a rally and recovery.
This is exactly what happened. The latest SEP showed that members still expect three rate cuts for 2024 (as shown in our Chart of the Week). Ma...
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