Breaking Down the Bullish Boost: Federal Reserve Meeting Recap | Episode 112 | 03-20-2024

Join Megan Horneman, Chief Investment Officer at Verdence Capital Advisors, as she breaks down the latest Federal Reserve meeting held on March 20th. Despite keeping interest rates unchanged, Federal Reserve Chair Jerome Powell's remarks leaned heavily towards the bullish side, reassuring investors. Powell's dovish stance, highlighted in both the press conference and Fed statement, hinted at a potential peak in rates and downplayed recent inflation concerns, fueling optimism in the market. While the Fed expects three interest rate cuts this year, one committee member suggests four, reflecting a shift towards a more positive economic outlook with upgraded GDP and inflation projections. Despite some lingering inflation worries, the Fed remains committed to its 2% inflation target, reassuring markets and sparking a strong rally. Stay tuned for further economic updates and don't hesitate to reach out to podcast at Verdence dot com with any questions or comments.

The Federal Reserve met today and while they kept interest rates unchanged, they delivered some for the bulls and not just some. They delivered a lot for the bullish side of the market. I'm Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today on Wednesday March 20th. The Federal Reserve met in their regularly scheduled meeting today and it was expected that they would leave interest rates unchanged. But Federal Reserve Jerome Powell in the press conference and even the statement from the Fed, delivered a much more dovish side of his views that helped that bull market side of the case, and let me explain what I mean. So, while they kept rates unchanged, what the market was looking for were the comments and then those dot plots. The comments really were a bit more dovish than we had anticipated and delivered for those bullish investors in the market. What that means is they mentioned that the rate has likely peaked. They still think there's basically three interest rates, for that will be expected at some point in 2024. They basically downplayed and this is where I say that they delivered a bit more dovish and really helped out the bullish side of the market because they downplayed the recent elevated inflation indicators. We think that might be a little bit of a mistake, but again, time will tell. We're not going to look at one month as a trend, but there has been some indications that inflation is much more stubborn to get down to where they need it to be. They didn't make any official comments or dates about the balance sheet. What they did mention was that it would be appropriate to reduce the runoff at some point soon. They did mention that risks towards meeting inflation and their employment goals are moving much more in balance.

Let's talk about those dot plots that also get released with this. As I mentioned, they expect three interest rate cuts this year, but there was one loan committee member that wants four interest rate cuts this year. The changes that they made were the biggest changes in GDP. Their expectation in their last meeting was for 1.4% GDP in 2024, but they bumped that up to 2.1%. They're more optimistic from the economic standpoint. They did reduce the unemployment rate expectation from 4.1% at their last meeting for it to be 4% this year. They did bump up their core PCE inflation rating from 2.4% at their last meeting for it to be 2.6% this year. Upgraded growth modestly upgraded PCE.

The reason the market has rallied so much on this is because again, they're saying inflation may be a little elevated, but they're not worried about being able to meet their 2% inflation target. They're still looking at 2% inflation to be met in 2026. Again, they won't wait to cut rates until we get to that exact 2% level. But as long as we're trending that way in a consistent manner, they will cut interest rates. The markets are loving these comments from the Fed. Strong rally today. We'll get some more data this week leading indicators, some more information from the housing side, so we'll be back with more economic data. If you have any questions or comments, please feel free to reach out to podcasts at Verdence dot com. I apologize about that. Thank you very much, thank you.