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In move that was widely anticipated by most market experts, the Federal Reserve on Wednesday elected to keep rates unchanged, holding its policy rate in a range between 2.25 percent and 2.5 percent. The capital markets initially expected rates to remain steady after the central bank spoke in more dovish tones following the fourth and final rate hike for 2018 last December.
“Patience” has been a recurring keyword in Fedspeak since the December rate hike that reappeared in January when the central bank elected to keep the federal funds rate unchanged, saying that it will be patient moving forward with respect to further rate adjustments. Moreover, the Fed has also been saying that it will be mostly data-dependent and have more flexibility when it comes to interest rate policy decision-making.
U.S. equities have been on the rise in 2019 thus far, but the capital markets are conflicted in terms of whether it’s an extension of the bull market that reached fever pitch in 2018 or the beginning of a slide that may have started near the end of 2018.
“The market is polarized: Half thinks we are in a bull market recovery and the other half thinks we are in a bear market rally,” said Eoin Murray, head of investment at asset manager Hermes.
What can mute the jitters and re-instill confidence in the markets?
“It will come down to the U.S. consumer. That’s the last thing that’s holding us up,” Boockvar said. “We’ll need a decline in the stock market to tip over the consumer. So if the stock market can hang in, I think the U.S. can continue to see some growth. If we start to go back to the December lows again, that could be enough to tip us over.”
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