Jul 23, 2019

With a Fed rate cut coming, analysts expect stocks to keep rising

Data: LPL Research; Chart: Axios Visuals

The S&P 500's 19% year-to-date return this year is no reason to sell, especially in light of July's expected Fed rate cut, strategists from LPL Financial argue.

What they're saying: “Even though fundamentals may not justify the market going much above our 3,000 forecast on the S&P 500, with the Fed tailwind behind us, we’ll ride the wave for now,” LPL chief investment strategist John Lynch said in a note.

  • While the market has already reached LPL's 2019 year-end target, Lynch and senior market strategist Ryan Detrick say the old stock market adage “Don’t fight the Fed” has them expecting more gains, and history is on their side.

By the numbers: The last 5 times the Fed started cutting rates outside of recessions, the S&P rose an average of 11.1% over the next 6 months and 15.8% over the next year,

  • The only caveat would be if the country is in the midst of a recession, like in 2001 and 2007. That's unlikely, given economists' expectations for a reading of 1.3%–3.3% on Q2 GDP.

Go deeper: Investors are selling stocks, but the market keeps rising

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Trump ups the ante on his Fed feud

Illustration: Rebecca Zisser/Axios

Just as the Fed seems poised to announce the first interest rate cut since the financial crisis, President Trump took his feud with the central bank one step further, saying it "has made all the wrong moves."

Why it matters: In previous administrations, it would have been unthinkable for the president to publicly lobby for a rate cut, which Trump says will goose the economy. And even though Trump may have unintentionally gotten everything he's wanted from the Fed so far, he is pushing for even more. On Monday, he tweeted: "A small rate cut is not enough, but we will win anyway!"

Go deeperArrowJul 29, 2019

Jay Powell's constraints

Illustration: Sarah Grillo/Axios

Jay Powell did his best impression this week of a Fed chair making his own data-driven decisions about where he should set short-term interest rates. The reality, however, is that the markets and the president are giving him very little choice.

Driving the news: Powell cut interest rates on Wednesday — the first time the Fed has done so in over a decade. In doing so, he effectively fulfilled a prophecy that the fixed-income markets (and even the stock market) had been making for all of 2019. They saw the rate cut coming long before the Fed was willing to admit it, and they were right all along.

Go deeperArrowAug 4, 2019

August has been the S&P 500's worst month over the last decade

The market reacts to statements about inflation from Fed Chair Jerome Powell. Photo: Drew Angerer/Getty Images

The last time stocks performed as well as they have so far this year was 1997, but historically as the market has boomed, August has brought significant slowdowns, analysts at LPL Financial warn.

By the numbers: "The S&P 500 has been down an average of 0.78% in August over the past 10 years, worse than any other month," LPL senior market strategist Ryan Detrick said in a recent note.

Go deeperArrowAug 1, 2019