Investors Hoping for a Rate Cut


Stocks on American exchanges are expected to rise more today after increases in yesterday’s session.

Seeing as how we’re still under the punishing downward pressure of new tariff activity and US/China trade belligerence, not to mention rumors and threats of new tariffs with Mexico and Australia, this seems … unusual.

Analysts reveal that the uptick is probably linked to investors looking for the Federal Reserve to cut interest rates.

“The data arrived against a backdrop of rising hopes that the Federal Reserve will cut interest rates this year, potentially in response to the economic impact of rising trade tensions between the U.S. and several partners,” write Chris Matthews and Mark Decambre at Marketwatch this morning, citing stronger than expected numbers from the Institute for Supply Management’s services-sector index, as well as jobs data from payroll data firm ADP. “Bond markets appeared to ratify this line of thinking …”

Yes, Jerome Powell has come out and said that interest rate cuts might be in the cards.

But is that a reason for bullish sentiment?

Or is there an alternative way to navigate today’s markets?

It could be said that not all positive activity is really positive. Advisors warn investors all the time about short-term versus long-term thinking – but in this case, it would seem that even in the short-term thinking, a more sober mood prevails, due to the simplified nature of the very idea that a federal interest rate cut could magically remove all of the current market challenges.

Guy Adami at Fast Money goes further.

“The Fed has, in large part, made U.S. companies lazy,” Adami said in a recent televised segment where panel colleagues attempted to label him “sour” and “angry.”

Adami pointed to GE and IBM as examples, suggesting that rather than just enjoying being propped up, U.S. firms need to figure out how to  be competitive.

In the same segment, Savita Subramanian also referenced how false optimism may pale under the weight of tariff consequences over a banner entitled “Don’t Trust This Bounce.”

“There’s something going on right now that is a little unnerving,” Subramanian said. (Watch the whole segment!)

If investors saw the United States and China making real diplomatic headway, that would be a much more tangible and solid catalyst for moving markets upward. That lacking, any gains today, analysts say, will be very much a product of hopeful thinking on U.S. central bank action.