Wednesday , June 26 2019
Home / canada / The decision of the Federal Reserve Fund is unprecedented, which means for the markets: JPM

The decision of the Federal Reserve Fund is unprecedented, which means for the markets: JPM



The Federal Reserve Fund's dismissal on Wednesday is extremely important for a meeting that is not expected to follow an increase in interest rates.

After a household, the Fed Presidency will hold a press conference after a meeting that does not create new economic forecasts – or no increase in rates was expected. Jerome Powell said he would break up with his predecessors this year, and after every Fed meeting he will deal with the public not just once a quarter.

But that is far from the only reason that the Wednesday meeting is unique. An unambiguous statement would mean that the Fed will stop its efforts to tighten monetary policy for the first time so late in the economic cycle, says John Normand, JPMorgan's chief asset strategist.

In January, Powell said the Fed would be "patient" when it saw the economic conditions evolve, thereby consolidating the market view that the central bank is really on a pause. Also, interest rate traders do not expect the central bank to increase this year, as it estimates whether recent market volatility has caused a slowdown in the economy.

Normand expects a six-month pause before the Fed continues to raise rates. If this were to evolve, it would not have been if the Fed stopped for the first time just to continue tourism when it receded the risks of the recession. In 1967, 1987, 1995, and 2016, events from the Black Monday to the recession of earnings interrupted the Fed's program.

However, this pause is unique because, because of how late the Fed has diverged, Normand said.

He also gave proof of why this expansion was later. This list includes record indebtedness for US and Chinese corporations, the unemployment rate over the past 45 years, the negative momentum of global earnings revisions, and the under-liquidity of S & P stock futures.

"Maybe it's more appropriate to refer to what's going on since the Fed's first late cycle than its fifth mid-cycle," Normand said.

In such a case, such episodes can provide free benchmarks that can be used to estimate what can happen in the markets, he said. The stronger signal is, however, how much each market is in a few months in price terms.

The bond market is the most important in this respect. The leading end of the yield curve – the gap between the two-year yield and the Fed's futures – is almost uniform, suggesting that traders expect rates to remain low and unchanged.

Given that the bond market has a price level in the Fed, JPMorgan is a short duration in the US, Normand said.

JPMorgan

Shares and credit markets are further behind the curve when it comes to fixing Fed's prices. Shares are traded at a level that has historically been consistent with a 10% profit during the Fed's pause. Such a rally would be determined by how long the Fed would suspend, Normand said.

JPMorgan is a multinational share stock in the developed markets due to the Fed's six-month hold.

JPMorgan

The trade-weighted dollar and gold are closer to their average values ​​during this Fed's pause.

"The weak dollar draw in 2016 appears to be more likely to be the way this year than the 1987 collapse if we are right that the Fed will continue the H2 turmoil, while several other major central banks whose policies dictate regional currencies, PBoC) they are on alert, "Normand said.


Source link