Bellevue Perspectives


Monday Minute

Pipe
  • On Wednesday last week, the Federal Open Market Committee met and pledged years of support and low rates to boost the economy.  In addition to the rates move, the Fed said it would keep buying bonds, targeting $80 billion a month in Treasuries and $40 billion in mortgage-backed securities.  In the release they also projected a 6.5% decline in gross domestic product this year and a 9.3% unemployment rate by the end of the year.   Following are key numbers and projections from the Fed through 2020, followed by the next two years and the long-run projection:

Fed funds rate: 0%-0.25% through 2022, with the long-run rate at 2.5%

GDP: -6.5% in 2020, 5%, 3.5%, 1.8%

Unemployment: 9.3%, 6.5%, 5.5%, 4.1%.

Headline inflation: 0.8%, 1.6%, 1.7%, 2%.

Core inflation: 1%, 1.5%, 1.7%.

https://www.reuters.com/article/us-usa-fed/fed-sees-gdp-drop-of-6-5-in-2020-pledges-at-least-120-billion-in-monthly-bond-buying-idUSKBN23H0I3

  • The equity markets were quite volatile to end last week  and into today on negative comments from the Fed Chairman Powell around the economic recovery and a spike in Covid-19 cases as the states reopen.  After a huge run off the bottom in March, a consolidation at some point was expected and somewhat healthy for a second leg higher.  The market technicals still remain supportive as we approach support levels near the 200- and 50-day moving averages.  Covid testing across the country is much more prevalent so the numbers were bound to increase.  Hospitalization rates however should be the important data point to watch, which don’t seem to be spiking.   https://www.reuters.com/article/us-usa-stocks/wall-street-gripped-by-fears-of-fresh-virus-wave-idUSKBN23M1A8

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