Big Tech Earnings Lift Market Sentiment

Powell didn’t say anything that would rule out a September rate cut, despite market jitters

Highlights

• Powell didn’t say anything that would rule out a September rate cut, despite market jitters

• Equity futures are up on big Tech earnings, with more to come today

• The S&P 500 has lost its correlation with the economy in recent years

•Bank of Japan signals a 2025 rate hike is still possible

Key Takeaways

• A September Rate Cut is Still a Live Prospect: The Fed wasn’t really that hawkish at all and it looks to us as if investors felt a need to be spoon-fed a narrative that cemented a September rate cut. The irony is that nothing Jay Powell said detracts from the view that the Fed will be rekindling the rate-cut program at that time. He did mention that others on the FOMC see the degree of restrictiveness as being more significant. The important thing is that the Fed is restrictive, full stop. We believe the conditions will evolve in such a manner that a rate cut will come at the September FOMC meeting and at least one more such move by year-end.