Bank holiday it must be rain

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The Fed meeting came and went, Powell, confirming that his committee was in no mood to rush cutting interest rates. There were no shocks or surprises, and as such, there was not really much of a reaction on the night. The good news, there was no sign that Powell was in the mood to hike interest rates further. So we had gone from the start of the year to expecting 6 cuts to 3 and are now worrying whether, as there are pesky signs, the disinflation story has run aground, whether the Fed would actually hike. This apparently dovish tone all led to a relief rally on Thursday in equities and bonds, as 1 cut seems to be the latest guess, sometime later in the year, ruling out any summer moves. As one can tell, dovish or hawkish is often relative to expectations, as are most things in life.

Later today, we will get the latest window on the employment sector, which will be on the watch list for bond, currency and equity traders. All will be looking to each other to some extent for guidance on how to react.

Earnings season for the first quarter is coming to an end, as the majority of big-cap names have reported. Last night, Apple was the last of the Mag 7 to report. Apple shares have struggled all year, but last night saw them rally as the company beat lowered expectations. Generally, large-cap US tech companies have justified their valuations by growing earnings well ahead of the market overall.  Unless there is an unexpected turn in the US economy or the inflation outlook in the coming months, the Fed will largely be taking the summer off.

Sell in May, go away, and buy back on St Ledgers Day is the phrase, and I think a dull few months overall are probably good for equity and bond markets. The ideal scenario would be moderate economic growth, inflation slowly falling back to the target, and the Fed starting later in the year to ease monetary policy. As we are aware, there is many a slip between cup and lip.

The local elections look like a disaster for the Conservatives, which was pretty much anticipated. I guess the question now is what that does for the timing of the General Election. Will Rishi bring it forward and try to get things over and done with or perhaps delay as long as possible, hoping signs of an improving economy and the possibility rates get cut in the summer help his cause later in the year?