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Fed Stays Put, Stocks Step Up
An unconcerned Federal Reserve prompted investors to set aside recent worries about upheaval and load up on cheap stocks.
Level Change 3/19/25 (%)
– – – – – – – – – – – – – – –
+0.9 Dow
+1.4 Nasdaq
+1.3 Nasdaq 100
+1.1 S&P 500
+1.2 S&P 400
+1.4 S&P 600
The Fed did what everyone expected: nothing, with great conviction. Despite leaving rates untouched at 4.25% to 4.5% for the second consecutive meeting, the central bank came across as dovish.
Its statement noted that uncertainty around the economic outlook has increased, with Chair Powell saying in the press conference that tariffs introduced higher inflation expectations — a revelation on par with discovering that fire is hot.
However, the Fed expects impact to be transitory. The Summary of Economic Projections (SEP) and dot plot show 50 basis points of cuts this year, unchanged from the December SEP but below market expectations of about 60 bp of easing this year prior to today’s meeting.
Powell seemed to dismiss University of Michigan sentiment inflation expectations, saying the economy is still fine and the Fed is well-positioned to respond to unfolding events. He reiterated from a recent speech that he’s in no hurry to adjust rates while awaiting further clarity on the impact of Trump administration policies.
Tesla (TSLA +10.6%) got the green light from California to start carrying passengers, a move Bloomberg called a sidle closer to ride-hailing and The New York Times described as “an early step” toward its robotaxi ambitions, leaving ample room for future detours.
DigiTimes reported that Paul Liu, head of Taiwan’s National Development Council (NDC) and a board member of Taiwan Semiconductor (TSM +0.4%), dismissed rumors that TSMC is eyeing Intel’s (INTC -6.9%) foundry division. He assured the world that such a topic has never graced the boardroom agenda — presumably filed under “things we wouldn’t touch with a ten-foot pole.” To drive the point home, he likened the idea to mixing diesel with gasoline.
Small caps put on another strong showing, proving once again that volatility is part of their charm. According to the Financial Times, the recent 19% drop in the S&P 600 (Nov. 25 – Mar. 13) is within historical norms, nothing to see here, folks. For now, there’s no sign that the turbulence signals a recession, just the usual thrill of small-cap investing.
— Jason Kelly
