UPRO - Equities And The Fed: A Dependent Or Codependent Relationship?
By Erik Norland
From early 2014 through 2018, expectations for rate hikes by the Federal Reserve (Fed) moved almost in lockstep with U.S. equity markets. Higher stock prices eventually translated into expectations that the Fed would hike rates while lower equities would cause (or at least coincide) with fixed-income investors backing off rate-hike expectations. Since the beginning of 2019, however, a yawning gap has developed between what equity investors and fixed-income investors expect (Figure 1).
Figure 1: Fed Funds & S&P 500 Have Diverged Before but Not Quite Like This.
Between the day after Christmas