The Fed's Latest Meeting Has Fueled Mr. Market

Investors loved the latest policy report from the Federal Reserve. And that means we need to watch closely from here... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [DailyWealth] The Weekend Edition is pulled from the daily Stansberry Digest. --------------------------------------------------------------- The Fed's Latest Meeting Has Fueled Mr. Market By Corey McLaughlin --------------------------------------------------------------- The Federal Reserve met in mid-March to report its latest policy statement and economic projections. The major indexes moved higher once Fed Chair Jerome Powell started talking. The benchmark S&P 500 Index and tech-heavy Nasdaq Composite Index closed up roughly 1%, and the small-cap Russell 2000 finished 2% higher. Gold and bitcoin prices rose, too... all while yields remained steady. So what exactly did Powell say that made Mr. Market giddy? First, as expected, the Fed kept its target federal-funds range between 5.25% and 5.5%, where it has been since last June. Second, it signaled multiple rate cuts to come later this year. And third, the bank said it would keep trimming its balance sheet, but less quickly than it has been for the past two years. In his post-meeting press conference, Powell indicated for the first time that the central bank would "slow down" the pace of balance-sheet reduction "fairly soon," he said. "We want to avoid any kind of turbulence," he continued. The idea is to avoid any potential troubles with the banking system... now that the central bank has chopped $1.5 trillion from its balance sheet since spring 2022. It was a well-received mix... In its quarterly projections, the Fed maintained an outlook for three 25-basis-point cuts to its suggested fed-funds rate later this year. It also projected inflation of 2.4%... GDP around 2% this year (higher than the 1.4% it projected in December)... and an unemployment rate at 4%, slightly lower than its last forecast. I was weighing two possible outcomes going into the meeting. As I wrote in the Digest recently... If we hear higher expectations for growth and inflation – and Fed interest rates – or any of the three, it could lead to a haircut for dollar-denominated assets. Alternatively, Fed numbers and a Powell press conference supporting the status quo could just keep the bullish theme going. The Fed gave us the latter, and the market loved it. The Fed's stance is that the pace of inflation is coming down enough... that the labor market isn't cratering... and that economic growth will continue to pick up – even before its promised rate cuts. You could also look at the slowing balance-sheet reduction (with the option to put liquidity into areas that might need it) as a kind of stimulus without moving rates. All in all, Mr. Market was happy with the news. --------------------------------------------------------------- Recommended Link: [Here's What You Missed This Week]( A rare market anomaly just caused one company to jump 275% in only two weeks... and another to skyrocket 170% IN A SINGLE TRADING DAY. It has nothing to do with the "Magnificent Seven" or the presidential election... and it doesn't involve trading options or bitcoin. Yet two renowned experts believe it may be the absolute biggest "no brainer" moneymaking opportunity of 2024. [Get the full details here](. --------------------------------------------------------------- And of course, we can't ignore what's happening across the pond... The European Central Bank ("ECB") wrapped up a policy meeting on the same day as the Fed. First, ECB President Christine Lagarde suggested that the ECB could cut its bank-lending rate at its meeting in June. Without explicitly saying it, she laid out the factors that the ECB string-pullers will weigh in the next few months. She mentioned inflation and wage growth, both of which have been slowing in Europe. As Lagarde said at a press conference in Frankfurt, Germany... If these data reveal a sufficient degree of alignment between the path of underlying inflation and our projections, and assuming transmission remains strong, we will be able to move into the dialing back phase of our policy cycle and make policy less restrictive. We haven't heard the words "less restrictive" uttered by a notable central-bank official in a while... Those can feel like magic words for many investors. Eurozone inflation cooled to a reported 2.6% annual growth in February. That's still slightly higher than the consensus figure economists were expecting... as was the 3.1% growth in core inflation (which leaves out volatile sectors of energy and food prices). The good news is, the inflation rate is trending down over the long term. The pace of inflation is well below its year-over-year peak above 10% in 2022. Lagarde also left open the possibility that the ECB might not cut rates – or that it might make fewer cuts than some might think. (Investors are thinking three cuts "over there" as well.) She said the ECB would make decisions "meeting by meeting." Its next meeting is in early April, followed by another in June. Other ECB officials have suggested that timing the first rate cut with the central bank's next round of quarterly economic projections (in June) could be a good idea. The head of the Dutch central bank, Klaas Knot, recently told the media... Personally, I penciled in June for a first rate cut. Where will we take it from there? We are data-dependent, so I would focus on those meetings in which we have the most data available, which are the meetings in which we have new projections, so September and December. I'm willing to bet Lagarde and Powell have been talking with each other about the same idea. They do chat about these things (Powell has admitted so publicly in the past), and the Fed's next quarterly economic projections are also due out at its meeting in June. Keep in mind, history suggests that the markets respond well to policy "pivots" toward incremental rate cuts. That's in contrast to the "emergency" cuts that we've gotten used to the past 20 years or so, which are associated with plunging markets. Now, I'm still not saying what the Fed or ECB is saying is or will be "right"... In fact, there's a pretty good chance that what they're projecting won't happen. We have good reason to believe the inflation numbers will remain higher for longer... So we should expect interest rates to stay higher for longer, too. But the market doesn't care what we think. That's why we'll monitor what Lagarde, Powell, et al. are saying. Enough investors hang on to the central bankers' words that their statements move prices. If nothing else, the narrative they sell provides an anchor for what financial conditions to expect in the months ahead and a backdrop for the market environment. Before I sign off, let's switch gears and talk about an "anomaly" in the markets... Last week, our founder Porter Stansberry went live with a brand-new free presentation. In short, he has spotted a "market anomaly" that has emerged in a select group of stocks that could lead to unparalleled returns... and soon. Porter sat down with Joel Litman – founder of our corporate affiliate Altimetry – to dive into this rare, incredible short-term setup... and to reveal why it shouldn't exist. This story isn't about a market crash or a banking crisis... Instead, it's about an incredible opportunity stemming from one of the deepest and longest corrections in one area of the market in more than 20 years. Porter and Joel both agree... It shouldn't even be possible. This situation only exists because of today's interest-rate environment. And it only happens once or twice in a lifetime. But you need to know 1) how to spot this anomaly, and 2) how best to take advantage of what's likely to come next, Porter says. It's something that folks on Wall Street are quietly talking about... And recently, it caused several small stocks to shoot up triple digits. One soared as much as 170% in a single day. Don't wait to tune in. The opportunity won't last long... [Click here to learn more about this can't-miss event](. Good investing, Corey McLaughlin --------------------------------------------------------------- Editor's note: Porter famously predicted the fall of General Motors... recommended bitcoin when it traded around $10,000... and foresaw much of the political unrest we've seen in the U.S. over the past few years. But he believes an even bigger story is unfolding today. And it could be the most valuable information you ever hear for free... [Click here to get all the details](. --------------------------------------------------------------- [Tell us what you think of this content]( [We value our subscribers' feedback. To help us improve your experience, we'd like to ask you a couple brief questions.]( [Click here to rate this e-mail]( You have received this e-mail as part of your subscription to DailyWealth. If you no longer want to receive e-mails from DailyWealth [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized financial advice. © 2024 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.