Late yesterday afternoon, it appears that some investors tried to put a positive spin on yesterday’s larger than expected Fed rate hike (0.75% vs street 0.50% to 1.75%), perhaps on the notion that the faster the Fed raises rates, the sooner it may finish rate hikes.
Overseas investors weren’t having any of that and appear to have focused instead on the more hawkish parts of the Fed news. This included an increase to the inflation forecast, a decrease to the GDP forecast, and a dot plot that suggested the majority of FOMC members think not only that the Fed funds rate could rise another 1.75% this year toward 3.50%, but that the Fed Funds rate could remain above 3.00% through 2024. Fed Chair Powell was particularly hawkish at his press conference, suggesting the Fed could hike another 0.50% to 0.75% at the July meeting, that the US central bank remains committed to getting inflation under control as its top priority and that its forecasts are not set in stone, they may change depending on what data comes in, noting the recent higher than expected US inflation numbers.
The parade of hawkish central bank decisions continues this morning. The Swiss National Bank announced a surprise 0.50% rate hike (-0.25% vs street/previous -0.75%), while the Bank of England announced another 0.25% rate hike to 1.25% as had been widely expected.
In the US this morning, Dow futures are down 1.5%, giving back all of yesterday’s 1.0% gain and more, while NASDAQ futures are down 2.2%, giving back most of Wednesday’s 2.5% gain. Overseas, the Dax and FTSE are both down 2.5%, while the Hang Seng fell 2.2%. With the 10-year treasury note yield holding steady near 3.40%, currency trading has been mixed but gold is up another 0.3%, while cryptocurrencies remain under pressure with Bitcoin down 1.4% and Ethereum down 3.6%. Commodities are getting hammered again today on concerns about demand growth in a slowing world economy with WTI crude oil down 1.50% and copper down 1.8%.
Meanwhile, US housing starts slowed more than expected (1.55M vs street 1.70M and previous 1.80M) and the Philadelphia Fed survey fell into negative territory (-3.3 vs street 5.5) suggesting a slowing economy.
SIA Wealth Market Outlook Webinar With Colin Cieszynski TODAY at 2:00 pm EDT
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Join SIA Wealth Chief Market Strategist, Colin Cieszynski (CFA, CMT) will be speaking to some of the most frequently asked questions from advisors over the last month including: defensive versus tactical investing strategies, the state of the economy and markets heading into summer, and past experience in US midterm election years.
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