By The Way - Market Update

February 2019

The Fed has killed the bear, and the "Fed Put" has been re-established. I mistakenly believed that Chairman Powell was a different breed than his predecessors and would stick to doing what he thought was the correct policy for the economy and not be dissuaded by the machinations of financial markets.   As recently as his October 3rd press conference he declared rate increases would steadily continue for the foreseeable future, and he saw no reason to be worried about markets.

Even as late as December 19th he used the term "autopilot" to describe how Fed policy would remain unchanged. Whether the cause was pressure from the President or the major banks, the near 20% decline in the S&P 500; or a concern about the economy, Powell folded and in a January 4th speech announced rate increases would be put on pause for the time being. From that point on the S&P has been on wheels. I don't want to suggest Fed language is the only factor impacting markets, but the correlation, especially recently, has been very strong. 

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By The Way - February 2019