Ryan Detrick, senior market strategist at LPL Financial pointed out on Twitter that since 1980, the Fed has cut rates 17 times when the S&P 500 was within 2% of all-time highs, with a rate cut in 1996 when it was literally at a record high. Others say that a rate cut in such an environment is not as uncommon as one would think. Read: An economy gone ‘mad?’ The Fed is going to cut interest rates despite record stock prices, low unemployment “Unemployment is below the Fed’s maximum employment target, prices are as stable as they have ever been in the history of the country, and the yield on a 30-year Treasury yield is 50 basis points above its all-time low,” he wrote, arguing that the Fed is clearly achieving its mandate of maximum unemployment in the context of price stability. Michael O’Rourke, chief market strategist at JonesTrading went as far as to call Powell’s testimony “surreal,” in a recent note to clients. This is not the traditional environment one expects to trigger interest-rate cuts. “I’m having a hard time figuring out why they’re planning to cut,” said Mark Stoeckle, chief executive officer and senior portfolio manager at Adams Funds, told MarketWatch, adding that his conversations with management have left them “cautiously optimistic” about the trajectory of the economy as benchmark stock indexes hit all-time high. Possibilities include a single 25 basis-point cut in the federal funds rate for the year at the next policy meeting in July, as well as a rare 50-basis point reduction later this month that kicks off several rounds of easing before the end of the year.
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