Chairman of the Federal Reserve Jerome Powell, may have just put an immovable object into the path of the bulls that are currently buying up stocks blindly at dangerously inflated valuations. The chairman’s comments made on Fed day may have created a short term top in the markets, said equity strategist Matt Maley. “The market could see a breather here,” Maley commented
On Fed day the Reserve lived up to expectations by leaving current interest rates unchanged, however what took the spotlight was Powell’s remarks on inflation that could upset the bulls applecart that they have been loading over the last few weeks. Powell said in his recent public appearance “We suspect transitory factors may be at work Investors took Powell’s choice of words and deemed that transitionary meant that the Federal Reserve will not be delivering the interest rate cuts that have currently been factored into stock valuations.
Following the Chairman’s comments the Dow Jones fell over 160 points on Wednesdays trading and the pressure on the markets continued into Thursday, with the Dow making a U-turn on their early gains and dropped by another 150 points by midday’s trading. Since the Feds comments, Investors have taken a more bearish stance and moved their holdings into defensive names such as Procter & Gamble, Verizon, McDonald’s and Merck. The movement into these stocks is the opposite of the action that the majority of April has seen.
The recent shortfalls have come just days after tech giants Microsoft and Apple breached the trillion dollar Market caps again, this due to a perfect combination of good performance in the first quarter and the rumor of expected lower interest rates moving into 2020. What we are expecting to see is a movement by the markets that will theoretically show a decline in value of stocks, meaning investors will have the perfect opportunity to pick up some big names at a lower price per share. We are going to be keeping a close eye on the indexes over the coming weeks.
George Livingstone – AMT Associates