The Market Is a Bit Too Sure of the Fed
In September’s earnings dead zone, central bank disappointment is the big risk for investors.
Bulls beware.
Photographer: David Paul Morris/Bloomberg
The market’s attention usually seesaws between corporate fundamentals and monetary policy. After earnings season effectively ended with an underwhelming report from Nvidia Corp., the Federal Reserve’s next rate decision — along with any signals about the future path of interest rates — is poised to dominate this month. The market’s lofty expectations for policy easing set the stage for what could be a volatile September.
Even with a jump on Tuesday, yields on two-year Treasury notes are down 0.11 percentage point since Fed Chair Jerome Powell spoke at the Jackson Hole central banking symposium on Aug. 22, leaving them about 0.13 percentage point above an almost three-year low. Stocks are near all-time highs, with forward price-earnings multiples close to their richest of the current millennium.