VOO - S&P 500: Fed At Risk Of Policy Error Again (Rating Downgrade)

2024-06-05 12:08:24 ET

Summary

• Recent comments from members of the FOMC suggest that rate cuts will come much later in September. We see increasing risks of a Fed policy error.
• Paul Krugman, who has been mostly right about the U.S. economy's resilience and the ultimately transitory nature of inflation, has also begun to warn of the risk of a recession.
• Wall Street banks that were previously bearish have recently begun raising their targets on the SPX in what seems to be a very late attempt to chase the bull market.
• Even some of Wall Street's most notorious bears have given up, perhaps another warning sign that we are near peak optimism.
• Accordingly, we are taking advantage of the recent rebound in U.S. equities to downgrade our rating on the SPX from "Buy" to "Hold".

Recent comments from members of the Federal Open Market Committee (FOMC) suggest that rate cuts will come much later in September rather than in June or July. With the Federal Reserve (Fed) keeping its foot firmly on the brakes despite evidence of disinflation and a cooling economy, we see increasing risks of yet another policy error....

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