The United States Federal Reserve elected to cut rates for the first time since 2008 on the last day of July. U.S. indices did not respond well to comments made by officials. Chairman Jerome Powell indicated that this rate cut was a temporary stopgap, rather than a return to full-blown easing. Evidently, this did not please investors.
Goldman Sachs (NYSE:GS) said today that the Fed will move on one more rate cut and then stand pat, putting the odds at another rate cut in 2019 at 80%. Shares of Goldman Sachs were down 3.6% in mid-afternoon trading on August 1.
Stocks took another hit after Donald Trump announced additional tariffs on China, seemingly re-igniting the trade war between the two countries.
JPMorgan Chase (NYSE:JPM) stock was down 2.36% at the time of this writing. The bank lowered its benchmark interest rates after the Fed made its downward move. Earlier in July JPMorgan warned that the decision to cut rates would eat into interest income at America’s top banks.
JPMorgan may get its wish as the Fed appeared apprehensive about committing to a prolonged round of monetary easing.
The biggest mover for bank stocks today was provided by the tariffs announced by the Trump administration. A renewed trade battle will likely rattle markets further and force central banks to review their options once again. I’m betting on dovishness going forward, and I’m unconvinced the Fed will stop with its downward movement after the next expected cut.
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