Six Strategists on Why Stocks Didn’t Lose It Over Tougher Powell

(Bloomberg) — Strong signals from Federal Reserve Chairman Jerome Powell that he is, for now, finished cutting interest rates failed to incite terror in the U.S. stock market. Quite the opposite: the S&P 500 erased early losses and rose as much as 0.4% during the final hour, sending it back to record territory. Unlike last year, when stern words from Powell ignited the worst fourth quarter for equities in a decade, investors had faith his current pause doesn’t amount to an abandonment of their cause.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance:

“In essence, the Fed needs to wean the market off the drip-drip-drip of rate cuts while still emphasizing that the Fed has their back in the event that the economy deteriorates significantly,” he said. “The difference is subtle, but the net effect is that slightly good economic data will no longer be met with a rate cut, and now even slightly worse-than-expected economic data will not cause the Fed to change rates. Ultimately a significantly worsening economy or a much-better-than-expected economy (or much-higher-than-expected inflation) will be the only reason the Fed will cut or raise rates again, respectively.”

Michael O’Rourke, JonesTrading’s chief market strategist:

“Despite signaling a pause, the FOMC delivered its third consecutive rate cut, while expanding its balance sheet with the S&P 500 at all time highs, U.S. GDP running above potential and unemployment at five-decade lows. One can understand why the markets don’t fear much these days — the Fed has ceded monetary policy decisions to market expectations.”

Ellen Hazen, senior vice president and portfolio manager for F.L. Putnam:

“The language has been chosen in order to definitively project that the language is balanced, and that the next move could be a cut or a raise, rather than over the last few meetings the language has been more dovish, suggesting the Fed was more likely to cut. This time, it looks more balanced,” she said. “This was well telegraphed. Based on the press statement, I think it was exactly as expected.”

Ed Keon, chief investment strategist at QMA in New Jersey:

“If you’re on the Federal Reserve right now, I think you’re tempted to take victory laps. We have inflation that’s very close to their target, unemployment rate is at a 50-year low, the stock market is at an all-time high. I think their policy has been quite successful. This time they’re signaling is ‘Don’t assume we’re going to cut in December, if the data continues more or less where it is — GDP in the 1.5-2% range, inflation around 2% or a little below, unemployment — as long as that stays where it is, we’ll stay on hold in December and we’ll reassess the data as it comes in,” he said. “Thing could turn south but he’s reflecting the reality that things were much more tense a few months ago in some ways.”

Jeff Mills, chief investment officer at Bryn Mawr Trust Co.:

“They’re trying to walk that line between somewhat leaving the door open for additional cuts, but trying to pull back market expectations. At least to me it seems they’ve done a reasonable job of that,” he said. “The economy does not warrant a tremendous number of additional cuts and I think Powell is going to go to great lengths to moderate expectations.”

Mike Loewengart, vice president of investment strategy at E*TRADE Financial Corporation:

“This is the clearest signal we’ve gotten that the time for action is over for the Fed. After all, ADP (NASDAQ:ADP) and GDP did exhibit significant growth this month, albeit at a slowing pace. What’s also interesting is the sheer alignment we saw from officials, and note that no one wanted a 50 basis point cut.”