CS: Value still not lifting as Powell puts the market

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Damien Boye at Credit Suisse has his take on the Powell Put overnight:

Overnight, Fed Chair Powell delivered the dovishness the market was looking for, but had not fully priced in. He suggested that:

  1. Many FOMC members were talking about cutting rates in June.
  2. The dip in inflation may not be so transitory, as initially thought.
  3. Uncertainty in the world is very high, weighing on activity growth.
  4. Financial conditions were easier, only because the market expects the Fed to deliver rate cuts.

The last comment is particularly stunning, because Powell has admitted the Fed’s reflexivity to the market, creating increasingly complicated feedback loops. Notwithstanding this, it appears that an end-July rate cut is coming. Money market pricing has shifted back to pricing in a certain July rate cut, after some doubt following the stronger-than-expected June payrolls number. Indeed the market is pricing in some possibility of a 50bps rate cut in July.

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