“A more ‘patient’ Fed helped turn risk sentiment,” Parker wrote in a client note this week that was cited by Bloomberg. “With the Fed providing a key circuit breaker, we see U.S. equities hitting new highs in the second quarter assuming a positive outcome from U.S.-China trade talks and a recovery in U.S./global growth.”
The Federal Reserve decided in late January that suspending its plan to raise interest rates would pose “few risks.”
When the Fed raised rates in September it was pretty much a given there would be another hike in December followed by several more in 2019, as it worked to cool a hot economy.
Yet by the time December rolled around, tumbling equity markets and economic indicators left many wondering whether the anticipated hike would even take place. In the end, rates did rise for the fourth time in 2018, but expectations for further increases in the near term fell as the Fed lowered its growth outlook for both 2018 and 2019.
It’s unclear whether there will be a rate hike at some point in 2019, with some Fed officials looking to raise rates if the economy is growing at expected levels. So far this year, we’ve seen a decline in consumer spending that triggered a downgraded estimate for Q4 GDP.
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