The Federal Reserve has released its decision on interest rates, opting to hold rates steady. However, the dot plot hints at the possibility of at least one rate cut on the horizon. To dissect the market outlook in the wake of this development, Market Domination welcomes Raymond James Chief Investment Officer Larry Adam and Morgan Stanley Investment Management Co-Head of the Broad Markets Fixed Income Vishal Khanduja.

Khanduja notes that the prevailing market sentiment is that the Fed's "next move is going to be into less restrictive policy," expressing hope that Fed Chair Powell will reiterate this expectation during his press conference. He points out that the Fed's commentary throughout the first quarter signaled a potential easing of monetary policy, despite the "timing of the first cut getting pushed out" due to data that did not align with the desired progress in the fight against inflation.

Adam, on the other hand, questions how much confidence Fed Chair Powell has in this forecast, with six months remaining in the year. He believes that inflation data is "coming down quite a bit," hoping that investors would be presented with two rate cuts from the Fed. Adam highlights that cyclical sectors of the economy are struggling to keep pace with current conditions, cautioning that "the Fed has to be careful not to wait too long before they start to cut their prices."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Angel Smith

Video Transcript

The fed leaves rates unchanged and we are moments away now from Fed chair, Jerome Powell's press conference for more on the Fed's decision to hold rates steady in the future path for rate cuts.

We have Larry Adam, Chief investment Officer at Raymond James along with Vishal KDU co head of broad markets fixed income at Morgan Stanley joining us now to discuss guys, welcome both of you to the the program.

Larry, I I'll start with you.

We have the fed decision.

They hold rates today.

They indicate one rate cut this year.

Larry, is that about what you expected?

Well, we thought you'd get two.

So I'm a little bit disappointed by this number.

I thought we'd get uh expectations for two cuts this year and I'm surprised they lifted that their inflation forecast is this for this year?

You know, I thought we were getting some progress.

Obviously, this morning's numbers show that we were gonna have continued progress in that.

So it does surprise me.

I think that's why the market is selling off just a bit here.

Really waiting on what, you know, uh Chairman Powell has to say at his uh press conference And Vachal, I, I know you think that today's meeting is, is quite pivotal, you know, for sort of setting out the path for the second half of the year.

What do you think we need to hear from the Fed today?

I think the biggest market assumption right now is that their next move is going to be into less restrictive policy.

I think their statements over the entire bumpiness of the first quarter continue to have that basic assumption being reiterated from the statement, the minutes as well as the fed speak.

And I think that's what we're hearing again, even though the first cut again, the timing of the first cut.

Yeah, seems to be getting pushed out rightfully.

So as the data has been uneven, um you know, you saw the Friday numbers of NFP telling you one story and then the jolts number telling you another one.

But then the CP I as as Adam pointed out was, was definitely milder on that uh disinflationary path.

So I think that basic assumption that the next move is going to be in less restrictive policy is, is what I would love to hear again from Chairman Paul at 230 Larry over to you, you know, the same question we're waiting now for Jay Powell.

Um coming up shortly here.

What would be your, what are you listing for, Larry?

What, what are you, what are you gonna be sort of listing for?

And actually you know, let's say I had, you had a question for him, Larry, what would it be?

You know, how much confidence do you have in these actual forecasts?

Right.

I mean, six months till the end of the year is still a long period of time.

You already know how much it has already changed in just the 1st 56 months of this year.

And I'd like to know what his confidence level is on those numbers because what I see from my basis, you know, on the ground, I do see inflationary prices coming down quite a bit.

I see the fact that I'm seeing a lot more businesses starting to cut prices because, you know, economic conditions are weakening.

Just look at the CP I report this morning, right?

You saw a lot of the more cyclical areas of this economy starting to show signs of struggle, airfares, you know, apparel, you know, oil prices, new car prices.

And I think the feds got to be careful not to wait too long before they start to cut the prices.

So I would ask him, you know, what kind of data is he seeing on the ground to really suggest that this economy really isn't starting to slow.

The other thing I just mentioned is that first quarter GDP did come in much weaker than what they even expected at 1.3%.

I was surprised that they kept it at 2.1% because that's expecting a pretty big bounce during, in the second half of this year.

So I'd be, I'm curious about that as well.