Market Keypoints

• US capital market indexes have resumed their downtrend from their yearly and multiannual top: The S&P500 index has initially fallen by almost 2.3 percent. 
• US markets waited for the US interest rate decision and Jerome Powell’s FOMC statement following the US rate decision.
• Also, the most waited interview after the FOMC statement for eventual clues on future interest rate decisions

Market Overview

US capital market peers have resumed their downtrend from their yearly and multiannual top. Yesterday, the S&P500 initially fell by almost 2.2 percent. But the most extensive index in the US rose on Jerome Powell’s comments on reading his FOMC statement.

The US markets waited for a pivotal event: the US rate decision followed by a statement decision and an interview with the US Chief Treasurer Jerome Powell. These events carry significant weight for the US capital market and economic trends, ensuring our audience is well-informed and actively engaged.

The federal interest rates remained unchanged, at 5.5%, as anticipated. However, the context makes this decision particularly intriguing: just a few days prior (25th April 2024), the Advance GDP (quarter over quarter) figures were a surprising deviation from expectations. Analysts were projecting around 2.5%, but the actual numbers were significantly lower, at 1.5%. 

Even the Bloomberg TV host – Michael McKee, couldn’t explain where this bomb fundamental news came from.

GDP comes in as a surprise. This one is for the “bears,” guys, 1.6%. That is about half of the 3.4% that we saw in the fourth quarter. It is also significantly lower than the anticipated 2.5%. We need to, at this point, look at what the issue was with that. Personal consumption, t2.5%, that’s lower than the 3% that was anticipated.

And so that, maybe, something that we need to look into: what happened with consumer spending, because it had appeared very strong? 

The quarterly price index is 3.1% for the headline. That is up from 1.6%. It is a tick higher than the 3% that was forecast.

And CORE (Core CPI) is at 3.7% on a year over year basis, up from 2%. So that is higher than the 3.4% by a significant margin, 3.4% that was anticipated.

So, at this point, what we’ve got is a series of data points that say, no, the Fed does not need to be cutting rates at this point.

Michael Mckee (Bloomberg) – 25th April 2024

Fundamental Analysis

We are not in standard economics like before the 2007-2009 era, marked by the global financial crisis. This statement implies that the current economic conditions and market dynamics differ far more from the pre-crisis era.

A decrease in GDP can have a deflationary effect, potentially reducing the general price level of goods and services in an economy. This deflationary impact, coupled with the changing dynamics of the FOMC statement and Jerome Powell’s commentary, underscores the urgent need for to reassess their market strategies. 

Markets will likely persist in their downward trajectory, exerting pressure on various sectors, from credit to blockages and even future aid for countries at war. The FED’s capacity to provide substantial funding shortly is also limited, necessitating preparedness for potential market shifts.

The recent GDP figures have significantly reshaped the market landscape. This reshaping will be evident on 30th May with the Preliminary GDP number and later on 27th June 2024 with the Final GDP number, which is a precise measure of the GDP. The next FOMC rate decision on 12th June 2024 also carries significant weight, highlighting the urgency and importance of these upcoming events.

The statement should have mentioned something about GDP. How much time will Jerome Powell spend avoiding the GDP number from its statements? No matter how many positive job reports there are, the markets will fall, at least if nothing from the GDP number and inflation changes soon.

You can read the official statement on federal fund rates here or download it in PDF format, or you can watch the full coverage of this crucial event below.

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Disclaimer:

This material does not represent trading advice, and any financial losses associated with this article are strictly your responsibility.