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Stock Market's Path Depends on Fed's View of What We Don't Know

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Stock Market's Path Depends on Fed's View of What We Don't Know

(Bloomberg) -- For investors and traders trying to game out where the US economy, the stock market or interest rates are headed in the second half of 2025, good luck. There's simply too much uncertainty to be sure of anything right now. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Take it from Federal Reserve Chair Jerome Powell, who used variations of the word 'uncertain' nearly 20 times in his post-meeting press conference on Wednesday. Wall Street pros were looking to Powell and the Fed for clues about what's next in a world beset by risks — from escalating war in the Middle East to rising trade tensions between the US and China. But the answer they got was a resounding 'we don't know,' with the central bank remaining in wait-and-see mode before deciding whether it can safely start to lower interest rates. 'If anything, the Fed's read-and-react stance showed just how clueless everyone is right now,' said Scott Ladner, chief investment officer at Horizon Investments. 'As an investor, you cannot trade this, you cannot get ahead of it.' The S&P 500 Index is within 3% of a record high, but it's been holding tight in a narrow range lately. There have been just two sessions this month with moves of more than 1%, and the benchmark has barely budged over the past two weeks. It's been a surprisingly stagnant period considering oil has soared and the dollar has plunged on the global developments. Headline Swings The problem for equity traders appears to be a lack of clarity as sentiment changes from one headline to the next. You could see it in the stock market action late this week. On Thursday, which was a market holiday in the US, futures contracts on the S&P 500 sank more than 1% in the morning following reports that US officials were preparing for a possible strike on Iran in the coming days. Then, President Donald Trump signaled that he wanted to give diplomacy a chance, which halted the decline. And Friday morning Fed Governor Christopher Waller said he could see interest-rate cuts starting as soon as July, which sent S&P futures jumping into the beginning of the regular session. But those gains turned out to be short-lived as Iran and Israel traded missile attacks and news hit that the Trump administration is ready to crack down on semiconductor plants in China. After all the back-and-forth, the index closed down 0.2% on the day. 'The S&P 500 is not breaking out one way or another because we've got crosswinds,' Ladner said. Fed officials left interest rates unchanged this week, with the majority of voting members seeing at least two more quarter-point cuts this year. Those views are essentially guesses, however, because the pace of inflation in the coming months and the resilience of the labor market remain unknown in the face of mounting risks. 'No one holds these rate paths with a lot of conviction,' Powell said at his press conference. 'We expect a meaningful amount of inflation in the coming months, and we have to take that into account.' And Wall Street is positioning accordingly. A gauge of equity positioning fell this week, led by discretionary investors who went from slightly below neutral to more notably underweight, data compiled by Deutsche Bank AG strategists including Parag Thatte show. With that cut, aggregate equity positioning now sits in the middle of the bottom-half of its usual band, the data show. The mood among Wall Street prognosticators is equally mixed. Swaps traders are pricing in a roughly 62% chance the Fed will lower rates in September, but there isn't a lot of conviction backing those positions. Michael Feroli, chief US economist at JPMorgan Securities wrote in a note to clients Wednesday that he foresees one cut this year, at the Fed's December meeting. UBS's senior US economist Brian Rose said that while the bank's base case still calls for 100 basis points of cuts starting in September, he sees risks skewed toward a later start to easing. And Bank of America economists led by Aditya Bhave wrote in a note on Wednesday that they aren't expecting any rate reductions this year. Uncharted Territory 'The Fed too is facing an uncharted territory,' said Bill Sterling, global strategist at GW&K Investment Management in Boston. 'We haven't had tariff hikes this large in modern history, and there isn't an easy model they can go to.' The S&P 500 is up 1.5% for the year after a stunning rebound from the brink of a bear market in April, when Trump unveiled his sweeping global tariffs. The gauge soared 19% from April 8, just before Trump paused the bulk of his levies, through the end of May on hopes that the trade war wouldn't turn out to be as bad as feared. But since then, the S&P has been pretty much stagnant, taking a few steps forward and a few steps back as each new headline rolls in. 'Long-term investors will be wise not to make abrupt shifts in portfolio allocations due to news headlines,' Sterling said. The challenge for investors is that the same dynamics that powered the S&P 500 to gains of more than 20% in 2023 and 2024 — the emergence of artificial intelligence, strong corporate fundamentals, and a resilient consumer — remain intact. But what's holding back optimism is everything else, the uncertainty around policy, geopolitics, slowing growth and creeping signs of stress at the bottom end of consumer spending. At their meeting this week, Fed officials downgraded their estimates for economic growth this year and lifted their forecasts for unemployment and inflation. Economic data hasn't offered much help either, with indications heading in divergent directions. A slew of figures pointed to early signs of the economy slowing down. US factory activity contracted in May for a third consecutive month. Industrial production declined in May for the second time in three months. A gauge of imports fell to a 16-year low. Job growth moderated. And May retail sales fell by the most since the start of the year. But that flies in the face of the latest reading in the consumer price index, a key inflation gauge, which showed US prices in May rose by less than forecast for the fourth month in a row, suggesting consumers have yet to feel the pinch of tariffs. Of course, those numbers can change quickly if higher levies set in and inflation jumps. All of which makes a hard road even tougher for traders trying to figure out how to position for the second half of 2025. 'The Fed has laid out its reaction function,' said Kevin Brocks of 22V Research. 'But investors will have to wait and see what the impact of tariffs on inflation actually is.' Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P. 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an hour ago

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Stock Market's Path Depends on Fed's View of What We Don't Know

(Bloomberg) -- For investors and traders trying to game out where the US economy, the stock market or interest rates are headed in the second half of 2025, good luck. There's simply too much uncertainty to be sure of anything right now. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Take it from Federal Reserve Chair Jerome Powell, who used variations of the word 'uncertain' nearly 20 times in his post-meeting press conference on Wednesday. Wall Street pros were looking to Powell and the Fed for clues about what's next in a world beset by risks — from escalating war in the Middle East to rising trade tensions between the US and China. But the answer they got was a resounding 'we don't know,' with the central bank remaining in wait-and-see mode before deciding whether it can safely start to lower interest rates. 'If anything, the Fed's read-and-react stance showed just how clueless everyone is right now,' said Scott Ladner, chief investment officer at Horizon Investments. 'As an investor, you cannot trade this, you cannot get ahead of it.' The S&P 500 Index is within 3% of a record high, but it's been holding tight in a narrow range lately. There have been just two sessions this month with moves of more than 1%, and the benchmark has barely budged over the past two weeks. It's been a surprisingly stagnant period considering oil has soared and the dollar has plunged on the global developments. Headline Swings The problem for equity traders appears to be a lack of clarity as sentiment changes from one headline to the next. You could see it in the stock market action late this week. On Thursday, which was a market holiday in the US, futures contracts on the S&P 500 sank more than 1% in the morning following reports that US officials were preparing for a possible strike on Iran in the coming days. Then, President Donald Trump signaled that he wanted to give diplomacy a chance, which halted the decline. And Friday morning Fed Governor Christopher Waller said he could see interest-rate cuts starting as soon as July, which sent S&P futures jumping into the beginning of the regular session. But those gains turned out to be short-lived as Iran and Israel traded missile attacks and news hit that the Trump administration is ready to crack down on semiconductor plants in China. After all the back-and-forth, the index closed down 0.2% on the day. 'The S&P 500 is not breaking out one way or another because we've got crosswinds,' Ladner said. Fed officials left interest rates unchanged this week, with the majority of voting members seeing at least two more quarter-point cuts this year. Those views are essentially guesses, however, because the pace of inflation in the coming months and the resilience of the labor market remain unknown in the face of mounting risks. 'No one holds these rate paths with a lot of conviction,' Powell said at his press conference. 'We expect a meaningful amount of inflation in the coming months, and we have to take that into account.' And Wall Street is positioning accordingly. A gauge of equity positioning fell this week, led by discretionary investors who went from slightly below neutral to more notably underweight, data compiled by Deutsche Bank AG strategists including Parag Thatte show. With that cut, aggregate equity positioning now sits in the middle of the bottom-half of its usual band, the data show. The mood among Wall Street prognosticators is equally mixed. Swaps traders are pricing in a roughly 62% chance the Fed will lower rates in September, but there isn't a lot of conviction backing those positions. Michael Feroli, chief US economist at JPMorgan Securities wrote in a note to clients Wednesday that he foresees one cut this year, at the Fed's December meeting. UBS's senior US economist Brian Rose said that while the bank's base case still calls for 100 basis points of cuts starting in September, he sees risks skewed toward a later start to easing. And Bank of America economists led by Aditya Bhave wrote in a note on Wednesday that they aren't expecting any rate reductions this year. Uncharted Territory 'The Fed too is facing an uncharted territory,' said Bill Sterling, global strategist at GW&K Investment Management in Boston. 'We haven't had tariff hikes this large in modern history, and there isn't an easy model they can go to.' The S&P 500 is up 1.5% for the year after a stunning rebound from the brink of a bear market in April, when Trump unveiled his sweeping global tariffs. The gauge soared 19% from April 8, just before Trump paused the bulk of his levies, through the end of May on hopes that the trade war wouldn't turn out to be as bad as feared. But since then, the S&P has been pretty much stagnant, taking a few steps forward and a few steps back as each new headline rolls in. 'Long-term investors will be wise not to make abrupt shifts in portfolio allocations due to news headlines,' Sterling said. The challenge for investors is that the same dynamics that powered the S&P 500 to gains of more than 20% in 2023 and 2024 — the emergence of artificial intelligence, strong corporate fundamentals, and a resilient consumer — remain intact. But what's holding back optimism is everything else, the uncertainty around policy, geopolitics, slowing growth and creeping signs of stress at the bottom end of consumer spending. At their meeting this week, Fed officials downgraded their estimates for economic growth this year and lifted their forecasts for unemployment and inflation. Economic data hasn't offered much help either, with indications heading in divergent directions. A slew of figures pointed to early signs of the economy slowing down. US factory activity contracted in May for a third consecutive month. Industrial production declined in May for the second time in three months. A gauge of imports fell to a 16-year low. Job growth moderated. And May retail sales fell by the most since the start of the year. But that flies in the face of the latest reading in the consumer price index, a key inflation gauge, which showed US prices in May rose by less than forecast for the fourth month in a row, suggesting consumers have yet to feel the pinch of tariffs. Of course, those numbers can change quickly if higher levies set in and inflation jumps. All of which makes a hard road even tougher for traders trying to figure out how to position for the second half of 2025. 'The Fed has laid out its reaction function,' said Kevin Brocks of 22V Research. 'But investors will have to wait and see what the impact of tariffs on inflation actually is.' Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P.

Charting the Global Economy: Key Central Banks Hold on Rates

Yahoo

2 hours ago

Yahoo

Charting the Global Economy: Key Central Banks Hold on Rates

(Bloomberg) -- Central bankers in the US, UK and Japan held the line on interest rates this week as officials attempt to gauge the impact of tariffs, uncertainty about economic activity and war in the Middle East. Security Concerns Hit Some of the World's 'Most Livable Cities' One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown While the median forecast from US Federal Reserve officials showed two interest-rate cuts by the end of the year, seven policymakers — up from four at the March meeting — indicated they see no reduction. The Bank of Japan unveiled a plan to ease the pace of its reductions to monthly bond purchases to ensure market stability while sticking to a path of normalization that includes the possibility of more rate hikes. The vote by Bank of England policymakers to hold rates steady was more divided than expected, leaving UK central bankers on course for a possible rate cut in August. Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics: World Japan's once-slumbering bond market has roared back to life with a burst of volatility that is echoing around the world. Major debt markets have moved in tandem with Japanese government bonds during the recent rout, with a spike in super-long yields in the Asian nation amplifying ructions fueled by global fears of widening fiscal deficits. Instead of processing copper in the US, many miners now turn abroad—where there's more than enough capacity—to transform the raw materials they pull from the ground. Economic pressure from China's army of smelters has been constant over the years and caused the US industry to downsize in the late 2000s and mid-2010s while demand for US copper dwindled. Now, demand is back but the US capacity isn't. In addition to US, UK and Japan policy decisions, officials in Pakistan, Chile, Armenia, Indonesia, Namibia, Georgia, Taiwan, Turkey and Botswana kept interest rates unchanged. Sweden lowered its key rate to a 2 1/2-year low and Norway surprised with a cut. The Swiss National Bank dropped its rate to zero and the Philippine central bank also lowered rates. Brazil boosted interest rates. US The Federal Open Market Committee voted unanimously to hold the benchmark federal funds rate in a range of 4.25%-4.5%, as they have since the beginning of the year. They also released new economic forecasts — their first since President Donald Trump unveiled a sweeping set of tariffs in April — showing they expect weaker growth, higher inflation and higher unemployment this year. New US residential construction declined in May to the slowest pace since the onset of the pandemic as an elevated inventory of homes for sale and high mortgage rates sapped the motivation to build. The pace of one-family home starts edged up but is still one of the slowest since 2023, while completions jumped. Sticker shock has yet to register for the residents of America's affluent suburbs and downtown condos, the target audience for luxury credit cards from JPMorgan Chase and American Express. The card companies are tapping into a new US economic reality: While the vast majority worries about money and is cutting back, the rich continue to shrug off recession concerns and spend freely. Europe In a decision that left rates on course for a potential quarter-point cut in August, six of the BOE's nine Monetary Policy Committee members voted to leave rates unchanged while three preferred an immediate quarter-point reduction. Economists had expected a 7-2 split. Investor confidence in Germany's economy improved more than anticipated as a forthcoming surge in public spending outweighs fears over looming US tariffs. UK home prices fell in April by most since 2021, government data show, as a tax increase drove some buyers out of the market. Asia The BOJ kept its benchmark policy rate at 0.5% and outlined a plan to cut monthly bond purchases from the next fiscal year to quarterly reductions of ¥200 billion ($1.34 billion) from the current ¥400 billion. The board's decision follows recent sharp moves in JGBs that rippled across global debt markets. China is testing the limits of what its consumer stimulus can accomplish by subsidizing purchases of select goods, fueling a shopping spree that boosted retail sales growth to the strongest in more than a year but threatening to overwhelm authorities even in the richest regions. Japan's exports fell for the first time in eight months as the US tariff campaign weighed on global trade, raising the risk of a technical recession after the economy contracted at the start of the year. The value of exports dropped 1.7% in May from a year earlier even as the export volume climbed 1.8%, suggesting exporters may be absorbing the tariff shock by cutting prices. Emerging Markets The United Nations nuclear watchdog said the location of Iran's near-bomb-grade stockpile of enriched uranium cannot currently be verified, as Israel's ongoing military assault is preventing inspectors from doing their work. Iran's 409 kilograms (902 pounds) of highly-enriched uranium — enough to produce 10 nuclear warheads — should theoretically be secured under an International Atomic Energy Agency seal at an underground facility at Isfahan. With the Trump administration's aggressive clampdown roiling migration patterns across the hemisphere, the top destination for outbound Cubans is no longer along Florida's shores. Instead of Miami they're flocking to Curitiba, in Brazil's farm country. --With assistance from Philip Aldrick, Irina Anghel, James Attwood, Claire Ballentine, Ruth Carson, Toru Fujioka, Annmarie Hordern, Sumio Ito, Masaki Kondo, Meg Lopes, Jacob Lorinc, Yoshiaki Nohara, Amara Omeokwe, Tom Rees, Andrew Rosati, Michael Sasso, Zoe Schneeweiss, Mark Schroers, Paige Smith, Jonathan Tirone, Fran Wang, Josh Xiao and Yvonne Yue Li. Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

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Stock Market's Path Depends on Fed's View of What We Don't Know

Stock Market's Path Depends on Fed's View of What We Don't Know

Charting the Global Economy: Key Central Banks Hold on Rates

Are Banks Open on Juneteenth 2025? List of Holiday Closures

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Stock Market's Path Depends on Fed's View of What We Don't Know

Stock Market's Path Depends on Fed's View of What We Don't Know

Charting the Global Economy: Key Central Banks Hold on Rates

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