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Market Update: 06-17-19

STOCKS AND FED RATE CUTS

John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial

A potential rate cut may give stocks a lift. Stocks have benefited recently from increasing hopes of a Federal Reserve (Fed) rate cut, pulling the S&P 500 Index back to within 2% of its record high set on April 30, as of June 14. On June 4 Fed Chair Jay Powell signaled a possible cut by saying “we will act as appropriate to sustain the expansion,” and since then, as of Friday, June 14, 2019, the S&P 500 is up 5.4%. The central bank’s verbal pivot, partly an acknowledgement that they must be ready to offset trade tensions, has pushed the odds of a rate cut in July from roughly 60% to 86%, based on the fed fund futures market. So what might a cut mean for stocks?

WILL THE FED CUT? It’s been a while since we’ve

It’s been a while since we’ve talked about rate cuts. After last cutting rates in 2008, the Fed started hiking rates in 2015 and has raised them a total of nine times since then. Now, amid the longest economic expansion ever recorded in U.S. history, the bond market is aggressively pricing in not one but...

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