“Summertime is always the best of what might be” – Charles Bowden

US Fed Holds Rate Steady, Hints at Future Cuts; S&P 500 Hits Record High Close

The US Federal Reserve opted to hold its key rate steady on Wednesday but hinted that its patience is waning regarding a near-term adjustment. Stating that it would “act as appropriate to sustain the (market) expansion”, investors and analysts took the language as a strong signal of rate reductions in the not-too-distant future.

The Fed vote to hold rates steady passed by a count of 9-1; the only dissenting vote on the hold decision came from St. Louis Fed Branch President James Bullard. He voted to cut the rate immediately.

The main considerations leading to potential near-term rate cuts include the trade conflict that President Trump has engaged in with China – which presents a threat to the economy and its growth.

September has been pegged by analysts as the likeliest time for the Fed to cut their key rate.

Markets reacted to the Fed’s dovish tone by rallying throughout the rest of the week – with the S&P 500 hitting its all-time high close on Thursday (at 2,954.18). The Dow Jones and Nasdaq also rose Thursday. Friday saw small pullbacks (0.13% for both the Dow Jones and S&P 500, and 0.24% decrease in the Nasdaq).

Overall, the Fed’s rate decision was kind across the board, with the S&P 500, Dow Jones, Nasdaq, and (indirectly) the TSX enjoying weekly gains.

In the near term, the Fed’s rate signaling should bolster markets and provide some further growth. From a portfolio construction point of view, we continue to see the US market as an important and core portion of a sound, well-diversified portfolio. The recent trade tensions and other distractions have not changed our outlook.

Let us know if you have any questions about your portfolio.


Sources: Yahoo! Finance, Advisor.ca, Globe Investor

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.