Bull market or bear market? Is a "textbook" soft landing coming? Powell may replicate the 1995 bull market
The immediate reaction of the stock and bond markets to the Fed's 50 basis point rate cut on Wednesday was cold, but optimism was rekindled on Thursday.
The three major U.S. stock indexes opened higher, with the S&P 500 hitting a new intraday record high.
Dario Perkins, managing director of TS Lombard's global macro department, said he never doubted the ability of Fed Chairman Powell, and he viewed the 50 basis point rate cut more as a sign of victory in the fight against inflation than a warning of the impending collapse of the U.S. economy.
"It's important to remember that the Fed's monetary policy settings over the past two-plus years were made in the face of a very different macro environment than the current one - inflation was at multi-decade highs, the labor market was severely imbalanced, and policymakers were afraid of repeating the mistakes of the 1970s.
Given the complete reversal of all these trends, it is clear that Fed officials can justify a 50 basis point rate cut without unsettling the market or creating an undue sense of panic," he said.
The economy looks similar to 1995 (ISM index on the left; unemployment claims on the right)
