The S&P 500 rose 0.3 percent on Wednesday after the Federal Reserve left interest rates unchanged at its monetary policy meeting and said that it did not expect to change interest rates in 2020.
“Powell was very explicit in guiding that only a ‘persistent, significant’ rise in inflation would lead him to support hikes,” economist Andrew Hollenhorst of Citibank said in a note to clients.
“There are not worrisome deflation undercurrents in this economy and Fed officials do not need to cut interest rates further to boost economic demand,” said MUFG chief economist Chris Rupkey.
According to BCA Research, the Fed's present monetary stance makes it a good time to own stocks.
BCA’s Chief US Investment Strategist Doug Peta said in a note to clients that the three rate cuts this year leaves monetary policy easy.
“A recession can’t begin until the Fed reverses those three cuts and, per our estimate of the equilibrium rate, tacks on at least three additional hikes,” he wrote.
This means there is scope for further gains for the S&P 500.
“Over the last 50 years, the S&P 500 has peaked an average of six months before the start of a recession, and returns heading into the peak have been quite strong,” he wrote.
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