Fed Goes Dovish amid ‘Uncertainties’ and ‘Moderate’ Growth


Jun. 20 2019, Updated 7:34 a.m. ET


On June 19, the Fed concluded its two-day meeting and provided a press release. As widely expected, the Fed kept the policy changes unchanged. The Fed indicated that it’s open to interest rate cuts. In the press release in May, the Fed said, “in light of global economic and financial developments and muted inflation pressures, the Committee will be patient.”

In the Fed’s June press release, it said, “in light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.” Looking at the Fed’s statement, it also seems concerned about the global slowdown.

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Growth is slowing

While the Fed’s remarks on future rate cuts are dovish compared to the May meeting, its views on economic activity have also changed. In May, the Fed said, “economic activity rose at a solid rate.” Now, “solid” has given way to “moderate.” The US first-quarter GDP expanded more than 3% and beat analysts’ estimates. The takeaway from FOMC meeting is that while the Fed looks amenable to a rate cut, it’s happening with the backdrop of slowing growth at home and globally. While the comments on future rate cuts would support markets, investors should also be mindful of sagging growth.

S&P 500 has rebounded

US equity markets have rebounded after the S&P 500 (SPY) fell sharply in May. The SPDR S&P 500 ETF (SPY) has risen 6.5% in June. Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT) have gained 13.0%, 7.5%, and 9.7%, respectively, in June. While Microsoft is near its 52-week high, Amazon and Apple are still below their 2018 highs. Last year, Apple and Amazon flirted with $1 trillion market capitalization. However, the crown is currently with Microsoft.


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