We had quite an event filled week. 3 top central banks made forward remarks regarding their monetary policy.
- Starting with the Euro, Mario Draghi made it clear that the ECB was ready to do whatever it takes to stimulate economic growth, including cutting interest rates and quantitive easing.
- Next the Federal Reserve confirmed they were on a very quick policy reversal. Fed Chairman Jerome Powel make remarks after the FOMC interest rate decision that they will cut rates as soon as July. Fed funds futures are pointing that there is a 98% chance to see two drops of 0.25% and an 80% chance of three rate cuts.
- Next the Bank of England Governor Mark Carney stated that they are maintaining policy and the growth forecast was lowered to 0%. Finally, the effects of Brexit turmoil have started to show in the economy.
The S&P 500 has reached its all time maximum. The stock market grew after the Fed left a dovish impression on monetary policy. The views and actions of the Fed have lowered the price of the US dollar and companies who thrive on export are the benefactors, driving stocks higher.
If you are trying to figure out, which way the markets will turn. Whether bulls will be the prevailing course or will we have a reversal, we need to look at most important pieces of information. Besides monetary policy, there is little guiding the market. Our true concern is if monetary policy is enough to stop the economic deterioration seen in economic data sets.