Chair Jerome Powell of the Federal Reserve made an economic remark that many Wall Street stock bulls have been expressing for months when he dashed market hopes for an interest rate decrease in March on Wednesday.
A decline in inflation is being felt, according to Powell. The growth rate is rather high. The job market is robust.
The most crucial point is that Powell stated the latter two indicators of economic strength pose less of a danger to the declining trend of inflation now. So, it's time to stop seeing positive economic news as "bad" because it may signal an impending interest rate rise from the Federal Reserve.
Good economic news, on the other hand, only implies that company activity is ramping up, which is great news for the stock market. And that's often good news for investors in the grand scheme of things.
Because of statistics like Friday's surprisingly good January employment report, analysts have not been worried, and their bets on a Fed rate decrease in March have dropped to less than 20%.
When the Fed begins reducing rates is irrelevant in the grand scheme of things. In order to foster a positive working environment for businesses, it is essential that policy be relaxed going ahead.
"The US economy is the most important driver of equity performance broadly," said Ben Snider, an equities strategist at Goldman Sachs, in an interview with Yahoo Finance last month.
"Whether the Fed starts to cut in March, May, or June, I don't think it matters very much," he continued. The most important factor is that the Federal Reserve is lowering the cost of capital for small firms that depend on external funding, which is encouraging on-the-margin investors to shift out of cash.
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