Fed Chair Jerome Powell is expected to sign a 25 basis points increase in interest rates on Wednesday and Ironside Macroeconomics’ director of research says the U.S. stocks could rally on the big announcement.
Knapp’s remarks on CNBC’s ‘The Exchange’
According to Barry Knapp, the rate hike is priced into the S&P 500 index that’s already down about 13% for the year. On CNBC’s “The Exchange”, he said:
We’re in a position to rally out of Wednesday’s meeting because we’ve had this appropriate adjustment, because we’ve had a big move in expectations around rate policy, and we’ve even moved interest rate vol and how that permeates across other asset classes.
U.S. inflation climbed again to 7.9% in February. Still, the Federal Reserve is likely to be less aggressive than previously indicated, considering the economic repercussions of the Ukraine war.
Knapp remains bullish on the U.S. stocks
Despite fears of stagflation, Knapp continues to be positive on the U.S. stocks as long as inflation comes down to around 4.0%. He said:
I think the bond market is not, but the corporate sector could be fine at something around or less than 4.0% inflation. So, I don’t think stagflation is a big issue. I’m also not worried about consumers’ ability to absorb higher gasoline prices. They’ll be fine.
The U.S. Crude price has come down to around $100 a barrel now after hitting $130 a barrel last week as President Biden banned Russian oil and gas.
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