📈 FOMC Causes Sell-Off

What happened yesterday?!

FOMC Causes Sell-Off

The market had one of its biggest selling days of the year yesterday after the FOMC released their interest rate decision, Dot Plot, and Powell held his press conference.

While the Fed did cut rates by 25bp as expected, the Fed made it clear that rates are not going to be cut as much as previously expected.

In addition to that, Powell struggled to answer questions about why they are cutting rates right now and how potential Trump policies (such as tariffs) could affect the Fed’s decision-making.

I posit that Powell’s comments are the key driver behind the sell-off. Read below to understand why.

Comparing last quarter’s Dot Plot to this quarter’s, you can clearly see that Fed members have shifted their stance on cuts and we no longer expect to see as many cuts as previously hoped.

Stock Market Reaction

The market sold down on the Fed decision, but really sold off on Powell’s press conference.

The red arrow below is when Powell began speaking. We then saw that level break, a retest of the opening level (signified by the green arrow) and that was it from there.

It’s important to note that the bulk of the sell-off is based upon Powell’s comments, not the interest rate decision or the Dot Plot.

Specifically, Powell mentioned that the interest rate decision was partially made based on potential policy changes that have not happened yet.

This is scary for the market, as he is making decisions based on what he thinks Trump will do, but he (along with everyone else) does not know what is to come in the Trump administration.

There is a lot more to cover with regards to what happened today. I walk through it all in this video: