1. Jerome Powell finally gets a ringing endorsement
Jerome Powell finally got the markets on his side. The S&P 500 fell after each of his first seven FOMC meetings as chairman (by far the longest on record), but the market jolted higher on Wednesday.
One big quote: "The big pivot in FOMC communication was not just the introduction of the word ‘patient,’ but also the removal of forward guidance explicitly signaling that the next change [will be a rate increase]," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
- "This is all the more remarkable given that back in December, 15 FOMC members anticipated one or more hikes to be prudent in 2019. There certainly has been a change of heart in DC."
Bank of America-Merrill Lynch called it the "Dove Show."
Between the lines: Whether Wednesday was, in fact, a good day depended on who you asked and what they buy.
- Dollar bulls got punched in the mouth, with the dollar index falling to its lowest in three weeks.
- Bond traders saw opportunity, as the Treasury yield curve steepened with investors buying shorter-dated bonds. Fed fund futures show the market is pricing in no more rate hikes this year and almost the same likelihood of a rate cut as a rate hike by December.
- Stock traders were giddy. The Dow jumped more than 400 points (Dow 25K!!!) and the Nasdaq gained 2.17%.
What's next? Scott Minerd, global chief investment officer at Guggenheim Partners, said the Fed’s pause will allow excesses to continue to build and increase the risks of financial instability. But that's a good thing if you like to party.
- "The Fed refilled the punch bowl and the party goes on," Minerd told Reuters. "Buy risk assets."