Federal Reserve Chair Jerome Powell had an "informal dinner" with President Trump, Treasury Secretary Steven Mnuchin and Fed Vice Chair Richard Clarida on Monday night to discuss "recent economic developments and the outlook for growth, employment and inflation," according to a statement released by the Fed.
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 D.C."
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."