A 0.25% Hike Puts The S&P 500 Between The Fed And The White House

Summary The S&P 500 now sits between restrictive Fed policy and supportive fiscal policy. I think this is not helping re-establish trust in the USD or America itself. The Fed projects a higher-for-longer rate path, with no cuts through 2027 and a neutral rate of 3.2%. Fiscal stimulus and energy shocks may force the Fed to tighten more than markets expect, but S&P 500 earnings remain resilient. As I argued in the past, in a context of a "trust" crisis, a claim on cash flows that can reset with prices (equities) is better than bonds. At ~19x forward P/E, much of the policy collision is priced in; I remain fully invested and would add on an ~8% correction (my bear case today). SlavkoSereda/iStock via Getty Images The Federal Reserve raised its policy rate by 0.25% on Wednesday to a range of 3.75% to 4%, in a unanimous vote, and its first hike since July 2023 . According to traditional macroeconomic theory, rates need This article was written by Geneva Investor 3.9K Followers Follow I write about Macro and fundamentals, with the (painful) awareness momentum and sentiment are what really matters. That’s why I never try to time the market and I only buy stocks if I am willing to hold them for at least 10 years. When it comes to fundamentals, everybody knows the market is forward looking, but few understand what that means. I don’t look at a P/E number and decide to buy if a stock is “cheap”. I see the market as literally just the meeting point between demand and supply and I always try to understand what it sees in a stock beyond the numbers. This often implies trying to understand sectors, industries and long term growth trends. My approach requires ingenuity, curiosity and a good dose of naivete, as well as being comfortable with (sometimes) going against the current.I am based in Geneva, Switzerland (hence my SA name). Friend "Rex Investing" is also a contributor to Seeking Alpha. All opinions and analysis are exclusively my own.You can follow me on Twitter @ x.com/GenevaInvestor. I am also on medium.com/@genevainvestor. Analyst’s Disclosure: I/we have a beneficial long position in the shares of VOO, QQQ, GLD, BTC-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.