#FedDovishNow
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The Fed projects a calm cycle of rate cuts like the one that spurred the stock market 30 years ago: Will history repeat itself?
The June 'dot plot' is valid, according to Powell, and only anticipates 100 basis points of cuts over 30 months. Such a gentle rate cut only has the precedent of 1995-1999, and the S&P soared.
Investors do not believe the scenario the Fed is anticipating and think there will be more aggressive cuts. The Federal Reserve projects 100 basis points of rate cuts in 2 and a half years.
Despite Jerome Powell admitting in Jackson Hole last Friday that the deterioration in U.S. employment leans the central bank towards a rate cut in September.
The process of rate cuts now projected by the agency is very calm. Powell has made it clear that the rate projections published in June remain valid and these only contemplate 100 basis points of cuts in the next 2 and a half years.
A process of gradual and non-aggressive cuts, unlike what is usually the case. There is a precedent for this type of cuts by the central bank, the period between 1995 and 1999, during which the U.S. stock market saw enormous gains.
