Apple managed to beat very low expectations. However, revenue fell for the second consecutive quarter. Nonetheless, the stock was slightly higher on the news. Consider it a safety trade. More broadly, stocks fell today as they wrestled with the threat of more regional bank failures and a committed Fed. Here’s my basic question: will we see three rate cuts before the end of the year? My view is we won’t see a single cut (let alone three). If I’m right (and I may not be) – there will be a painful adjustment in the market.
Fed Reserve
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“One and Done”… Not Yet
The market wanted “one and done”… that was the expectation. Powell spoiled the party. Whilst the market expected a 25 bps Fed hike – what it did not know was whether any hike would be ‘dovish’ or ‘hawkish’? For example, a dovish hike would be something like “we see the end of inflation… we’re winning the fight”. On the other hand, a hawkish tone would be sentiment to the effect of “it’s still premature to make that call”. We heard more of the latter… less of the former.
A Very Narrow Market
Last week all eyes were on large cap tech earnings. They delivered a mixed bag… but on the whole ‘better than feared’. Q1 earnings didn’t fall off a cliff. Single digit growth (top and bottom line) was largely cheered – which highlights how low expectations were. Next week eyes turn to the Fed. The market has priced in a 25 bps hike for May – but will it be a ‘dovish’ hike – where they offer language to suggest a pause in June? Or will they say “there’s more work to do”?