Why the rate cut “didn’t work”

I agree 100% here with my pal Peter Boockvar:

Financial conditions only ease if market participants are confident enough to take risk but because of the huge economic unknowns right now still, investors will remain risk averse thus diluting the impact of this move. The fear in late 2018 was due to the perceived over tightening by the Fed. Thus, backing off from that tightening directly addressed the fears and risk taking was unleashed. As for encouraging higher consumer and business confidence, this type of panicky move, when the Fed has only 4 more rates to cut, I believe does the exact opposite.

I don’t consider myself qualified to judge whether or not economic conditions warrant a cut or not. But this was a market-related cut, and I pay as much attention to market psychology as anyone on earth. And I am saying the Fed panicked and it didn’t work. To Peter’s point, it may have even been counterproductive.

 

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