Market Quote: The Fed Stays The Course, Trump’s Potential Impact on Markets
Author: The editor's desk
March 20, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Dots Were Hot, Powell Was Not
The U.S. Federal Reserve (Fed) left its key lending rate unchanged earlier today, but markets initially focused on the 2024 median forecast for the Fed funds rate being unchanged from the December projection.
We believe that the U.S. central bank’s Summary of Economic Projections reflects a Fed that is hawkish; they don’t believe they will not need to cut as much as they previously thought, implying a shallower rate cut cycle with higher trough rates. The longer-term projection for the policy rate, a proxy for the neutral rate, also edged higher.
During the press conference, however, Chair Jerome Powell came across more dovish and he did not seem overly concerned with recent sticky inflation data, nor did he show concern on financial conditions. He also did not shed too much light on quantitative tightening other than suggesting that the longer-run goal is to return the balance sheet to be composed of mostly Treasury assets suggesting less appetite for mortgage-backed securities.
Trump: Bump or Slump?
Many investors are leery of Donald Trump, but the economy and the markets performed well during his presidency and stock markets have moved to fresh highs in recent weeks, as Trump opened up a modest lead over Biden. While the markets may tire of Trump’s bombast and endless controversies, the big factor will be policies.
The top market concern may potentially be tariffs, which Trump has promised to raise to 60% against rivals like China, which would be a de facto tax hike in the U.S. and undoubtedly could prompt retaliation around the world.
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of March 20, 2024 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
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