Investors still harbour hope of Fed’s Powell giving a rate-cut the thumbs up

THE S&P 500 plunged into a bear market in April, then staged an epic recovery, and now the US Federal Reserve will reveal which was the correct response.

The central bank is likely to leave rates unchanged at the current level between 4.25 and 4.5 per cent at the end of its two-day meeting on Wednesday (May 7). There’s now a chance, however, that Fed chairman Jerome Powell will telegraph a pivot to rate-cutting later this year. It’s a chance that the stock bulls are counting on.

Solita Marcelli, chief investment officer (Americas) of UBS, wrote in a note to clients: “Markets are now factoring in both a Trump and a Federal Reserve ‘put’, in line with our base case that tariffs will be reduced from current announced levels over the remainder of the year and that the Fed will cut interest rates further in 2025.”