Republic Risk: Powell Says Cuts Might Not Come in March

That's not surprising. The Fed isn't close to done with its fight against inflation. Now, we wait to see if this market has reached another top, and what comes next

Dear Fellow Expat:

A quick note on the backside of the Federal Reserve’s decision not to cut interest rates this afternoon. While I’ve commented that the Fed has an uncertain economic outlook, I also note a key line of Jerome Powell’s press conference.

“We believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint, at some point this year,” Powell said.

But… there was no clear signal that the Fed will cut interest rates in March. The odds of a rate cut in March have now dropped from a 50% probability to 40%. And markets remain quite stretched given the breakneck rally that took the Nasdaq to overbought.

We have a very bumpy schedule ahead for the next few days. Apple (AAPL) and Amazon (AMZN) will be reporting earnings. Then, we’ll have a critical jobs report on Friday that is supposed to show a slowdown in hiring.

Based on the overbought conditions…