Fed chair Powell speaks: ‘markets are still in a good place’

S&P 500 is trending up at writing even after Jerome Powell – the Chair of Federal Reserve dubbed it “premature” to expect aggressive rate cuts in 2024.

BMO analyst shares view on S&P 500

Powell told his spectators at Spelman College in Atlanta on Friday that the Federal Open Market Committee will stick to a “restrictive” policy until it’s entirely confident that inflation is on its way back to 2.0%.

Still, Yung-Yu Ma of BMO Wealth Management remains fairly constructive on U.S. stocks. On CNBC’s “Squawk on the Street”, he said today:

The trajectory is still more important than the actual timing. As long as inflation keeps falling, growth stays stable, I think markets are still in a good place.

Earlier this week, the U.S. Bureau of Economic Analysis said core personal consumption expenditures price index popped 0.2% for the month in October – in line with expectations.

Rates will remain higher for longer

Ma did agree, however, that the Federal Reserve will likely keep rates higher for longer even if the economy remained stable as it’s focus is primarily on bringing inflation back to within its target.

Interestingly, Chair Powell even suggested on Friday that he’s open to further tightening “if it becomes appropriate to do so”.

For now, though, he added, the risk of over tightening was pretty much balanced with the risk of under tightening.

Note that Goldman Sachs expects Brent oil prices to hit $100 a barrel again if OPEC+ maintains voluntary cuts in 2024 – the plans of which some of its members announced just a day ago. S&P 500 has gained more than 11% in just over a month.