
No rate cut? No problem. Learn how the markets—and you—can still thrive.
KEY TAKEAWAYS
- Fed likely to hold rates steady; Powell’s press conference will drive market reactions
- Investors seek answers to economic anxiety—much like expectant parents seek prenatal guidance
- Tariffs and weak earnings guidance will likely add to market volatility
- Media and politics will amplify short-term noise
- Long-term investing remains the most reliable strategy
MY HOT TAKES
- Markets are having a “pregnancy scare”—too much worry, not enough perspective
- Powell’s speeches move markets even when he says nothing new
- The Fed may claim not to care about stocks, but we know better
- Tariffs are becoming the go-to excuse for weak earnings
- Long-term investing beats emotional whiplash—every time
- You can quote me: “You don’t need to know everything that could go wrong. You need to stay invested, stay smart, and maybe—just maybe—skip the scary pages now and then.”
What to expect when you're expecting… nothing. If you are of a certain age, my tagline 👈should have made you smile. My daughter was born in 1995, which was before Al Gore invented the Internet 🤣, making pregnancy a tad more challenging than it may be today, especially for first-time parents.
You get the good news–two blue lines–and the elation is indescribable. 🤸 You are going to have a baby… in 40 weeks. As an adult, that was probably your first lesson in patience under pressure. Within a day and half, your questions AND fears start to overwhelm your every thought. You made mental notes but finally decided to write them down for fear that you would forget to ask your doctor in your few brief minutes over your few brief appointments.
But alas, there was salvation. In a small corner of a small bookshelf in a remote corner of your local bookstore (Amazon was not a thing yet) was an “Expecting Mothers” section with a whopping 2-book selection. That is where you would find your new best friend, What to Expect When You're Expecting, aka “The Pregnancy Bible.” It had all the answers to all your questions. Now, pay attention, because if you were like me, you studied that book with a newfound level of intensity–I am talking about religious intensity.
Each month, you could learn what was going on in your baby’s development. There were even illustrations. 🐣 Each month’s info was spread out over several pages. The first was very exciting, and the ones that followed were… well, terrifying, for lack of a better word. They were filled with everything that could go wrong in your pregnancy in that month, igniting peak fear in expectant parents. You were then set for the next 30 days wondering which bad thing would happen.
Why such a long introduction? Why? Because today is Fed Day, and we get to hear what the venerable bankers in blue–the pilots of the largest economy in the world–are going to do with some obscure interest rate: Fed Funds. We are told that when it goes down, it is good for us and our portfolios, and vice versa. We are not just told; we have witnessed our stocks and fortunes ebb and flow with that very obscure interest rate. Have you ever borrowed at the Fed Funds rate? Of course, you haven’t, because that is the rate that banks charge each other for overnight loans. Yeah, that is obscure.
Anyway, today we will probably hear that the FOMC has decided to keep Fed Funds unchanged at 4.5%. They are likely to tell us that inflation is still above its self-created target of 2%. They will further say that they are monitoring any potential inflationary forces from “trade frictions”. Additionally, they will point out that the labor market is healthy. They will surely let us know that they saw that last negative GDP print, and that they are monitoring it. They are watching things closely. Ok, thanks, so we’ll see you on June 18th for our next appointment.
It won’t end there. Chairman Powell will take to the podium at a press conference, read some prepared notes which are the long version of the short policy statement. He will then take questions from the Press, who will fight to get some answers to our real questions. “Will there be a recession?” “Is this Trump’s fault?” What happens if unemployment rises and inflation also rises?” “Is this stagflation?” “Mr. Chairman, when are you going to cut interest rates?” But you really want to know, “when will markets start to go up again?” No one will actually ask that question, but he will be pressed about whether the Fed is aware of the state of the equity and bond markets, and he will say that the Fed doesn’t care, though we know that they do. During the Q&A, you will see markets undulate and agitate until you can no longer take the agony and decide that your focus is better served… elsewhere. Yes, Jerome Powell’s words are likely to strike a noticeably hawkish tint, and markets may not be happy about it. You will read about it tomorrow morning in this very note. 😉
Tomorrow, markets will work through all the possible negative scenarios, and we are likely to hear from the White House at least once today. Powell will be criticized, possibly rightly so, but that is inconsequential. What is consequential is that there will be more confusion about what is important for our portfolios. We will also have to contend with a bevy of earnings after the close. At least half of those companies will lower guidance or withdraw it completely and point the finger at tariffs. Oh, right, tariffs. The US is “in talks” with China about trade starting today. Surely, we will get some updates on those today as well.
All these things will show up on your doorstep tomorrow morning in a sloppily wrapped package of nerves, just in time for your morning brew. If the market is down, it’s instant anxiety. If the market is up, well, also anxiety, because how long can it last? The Fed may not cut rates until its June meeting, and these trade tensions may… um, never really get completely resolved. And, oh Lord, Q2 earnings season will start before you know it, and that is supposed to be jam packed with negativity as it will reflect “actual” tariff impacts. All the while, the media reminds us that we will start to see price increases and empty shelves “any day now.”
So, you get through those tough few pages. Your heart is visibly beating in your chest, you turn the page slowly, and there it is. You get to the next month’s summary page, but you don’t read it because you don’t want to take away the joy when you get there. I will tell you the secret of how I got through those 40 weeks. I would scan the “negative” pages for numbers. The authors would sometimes slip in statistics. Guess what? Those statistics would typically show very low probabilities of those “negative” occurrences. Interestingly, the numbers jibed with reality, as humankind has thrived and has been reproducing for nearly 300,000 years.
The Dutch East India Company is said to have been the first issuers of exchange-traded stocks in 1602. Right around the corner from my office, under a buttonwood tree was born the New York stock exchange in 1792, and wouldn’t you know it, markets have thrived ever since. You know what we learned in the 233 years since? Long term always pays! We have the numbers to prove it. So, settle down, don’t get caught up in the noise. Be diligent with your investments, but above all don’t worry! I realize today that I should have just opened my What to Expect book to the last page, and all my fears would have melted away. 👶
YESTERDAY’S MARKETS
Stocks declined yesterday as post-market earnings and trade fears kept equities in the red. The President took aim at the film industry stoking new tariff fears and a new vaccine regulator was named at the FDA pressuring healthcare stocks. Traders spent the session digesting negative news–indigestion ensued.
NEXT UP
- No economic releases today.
- The FOMC will release its policy statement at 2:00 PM Wall Street Time, and the Chairman’s press conference will start at 2:30. The Fed is largely expected to keep policy unchanged, but the statement will be parsed for hidden messages. The real fireworks will come in the presser.
- Important earnings today: Disney, Uber, Rockwell Automations, Lantheus, Vistra, Flex, Liberty Media, Emerson Electric, Spirit Aviation, Johnson Controls, Avis Budget, Dutch Bros, Corteva, Fortinet, Occidental Petroleum, Howard Hughes, Carvana, Bumble, IonQ, Zillow, Sunrun, AMC Entertainment, and Groupon.