Here’s What the Fed Will Do in June

Fro the Daily Reckoning

BY BRIAN MAHER

Bears flee in headlong retreat. Order has returned to the streets…

The Dow rebounded 56 points yesterday after Wednesday’s 373-point insurrection. It’s up another 142 today.

Both the S&P and the Nasdaq steer a parallel course — the S&P’s up another 16 today. The Nasdaq, 29.

Investors clearly “bought the dip.”

Again.

Watchful eyes now turn to June 13 — when the Fed’s Open Market Committee meets once more.

It raised rates 0.25% last December… only the second hike in a decade.

Then again this March.

But markets plowed all the way past Dow 21,000… a road paved with promises of  tax cuts, deregulation, infrastructure spending…

The Trump “reflation trade.”

But with the latest Washington intrigues — and with none of Trump’s agenda in prospect — does the Fed hazard another hike next month?

Yes.

Markets gave a June rate hike about a 100% probability just weeks ago.

And after this week’s fun and frolic?

Down to about 70%.

Down, that is… but still likely.

Jim Rickards:

The Fed is still on track to raise interest rates in June. The stock market action Wednesday was no more than a speed bump for the Fed. It will not stop the Fed from moving forward with another 0.25% rate increase.

Jim says the Fed isn’t as mindful of the stock market as most believe.

And if the market kicks up another nasty chop, investors shouldn’t necessarily expect a lifeline from the Eccles Building.

Not long ago, Jim broke bread with the Fed’s No. 2 man, William Dudley.

You might be shocked to learn that Dudley said it’s “not our job” to keep investors in clover.

Jim says the Fed “doesn’t care about these stock market gyrations.

“While declining stock prices indicate tighter financial conditions,” Jim continues, “they are neither a determinant nor the object of Fed policy.”

How far must stocks tumble before the Fed intervenes?

Ben Bernanke told Jim (Mr. Rickards runs with a fancy crowd) that “the Fed doesn’t care if the stock market goes down 15%.”

The Fed might not care. But you might.



Categories: Economy, The Fed

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