This article was originally published on ETFTrends.com.
U.S. markets and stock exchange traded funds continued to strengthen Wednesday after the Federal Reserve signaled potential interest rate cuts later this year, bolstering investors' confidence that the economy can weather any storms brought by the ongoing trade war with China.
After its latest meeting, the Fed said it “will act as appropriate to sustain” economic expansion, signaling the possibility of rate cuts of as much as half a percentage point over the remainder of 2019 to back up its promise, Reuters reports.
“We think the Fed delivered. It did no harm. It walked right up to a cut without doing it today. It’ll likely be coming in July absent some big trade news or other news,” John Augustine, chief investment officer at Huntington Bank, told Reuters.
Following a two-day policy meeting, the Fed held benchmark rates steady, but it dropped a previous promise to be “patient” in adjusting rates, which markets interpreted as a sign that interest rate hikes are no longer on the table.
“At the end of the day what they (the Fed) want to do is give a nod to the market. Expectations had gotten so dovish that they need to give a nod to that, but at the same time not make any commitment and be forced to cut rates later on if conditions perhaps changed,” Kristina Hooper, Chief Global Market Strategist at Invesco, told Reuters.
After the meeting, eight of 17 officials projected the Fed would need to cut benchmark rates this year, with a majority of officials projecting benchmark rates would be below its current level by the end of 2020, the Wall Street Journal reports.
Further adding to the market optimism, President Trump and Chinese President Xi Jinping agreed to meet at the Group of 20 summit in Japan later this month, which helped spark hopes for a trade in the prolonged trade war between the world's two largest economies.
For more information on the markets, visit our current affairs category.
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