What’s Happening in the Market in June 2019

Published June 5, 2019

Market sentiment has shifted over the course of late 2018 and 2019, and at no point has that sentiment changed more rapidly than in the last week. For most of Q4 2018, conventional wisdom was that the Fed would continue to raise short-term interest rates. This sentiment coincided with the 10 year Treasury hitting its highest point in years, closing at 3.24% on November 8, 2018. Heading into 2019, market conditions were choppier, and by February/March the emerging consensus was that the Fed was unlikely to move rates in either direction anytime soon. That sentiment held basically until the last few days.

What we’ve seen recently is that major Wall Street banks have changed from predicting no movement any time soon from the Fed to believing that the Fed will cut rates by 0.50% or more before the end of the year. This perspective has been reinforced by members of the Fed’s own Board of Governors indicating in media appearances that rate cuts may be coming soon.

The Fed next meets June 18-19 and could decide to cut rates at that time. Based on the comments from St. Louis Fed Governor James Bullard, it still seems unlikely that the Fed will move rates in June because it’s reticent to be seen as overly reactive to short-term market sentiment and because there’s a desire to see how the trade disputes unfold. However, the market now predicts a 68% chance that rates will be cut in July, up from a 20% chance just a week ago.

Market-Based Probability of a Rate Cut at the Federal Reserve’s Meeting in July

market-based-probability-of-rate-cut-nyt
Source: New York Times, CME Group

If you’re interested in reading more, here are several articles on this recent shift in sentiment by the Fed.

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Matt Carey

Matt Carey

Financial Planning Professional

Matt Carey is the co-founder and CEO of Blueprint Income. He believes in the power of technology to make retirement simpler. Matt is a regular contributor to Forbes.com and has been quoted in both the New York Times and Morningstar.

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