The market is blowing off what the Fed is saying about rates
Wall Street axiom warns to “never fight the Fed.” But that’s exactly what traders are doing, and it could spark a rally in some of the forgotten corners of the stock market.
Federal Reserve forecasts and comments from central bankers couldn’t be more clear. Investors are being warned that interest rates will stay higher for longer than they’d expected, with the median projection from Fed officials calling for one interest rate cut this year.
And yet cash is pouring into stocks that benefit from lower borrowing costs. The technology sector had $2.1 billion of inflows this week, the most since March, according to data compiled by EPFR Global and Bank of America.
“The market is just not sold on the prospect of inflation and labor market readouts not giving the Fed the room for multiple cuts this year,” said Keith Buchanan, senior portfolio manager at GLOBALT Investments. “That stubbornness is keeping intact the environment that benefits risk assets.”
The central bank’s projections for fewer rate cuts this year and Fed Chair Jerome Powell’s seemingly hawkish comments at his press conference on Wednesday didn’t prevent the S&P 500 Index from eclipsing 5,400 for the first time ever, which also happened on Wednesday and held through at least Friday. The benchmark is up more than 50% since hitting a bottom in October 2022, during a bear market triggered by the Fed’s drastic interest rate increases that started in March 2022 and were aimed at taming runaway inflation.
The question now for investors is what will the market
