- Tom Lee sees the Fed’s recent moves as market-friendly, suggesting tariffs may be transitory, allowing intervention if labor markets weaken, while Steve Liesman notes the Fed’s focus on balancing inflation control with readiness to counter tariff-related economic slowdowns.
- Lee identifies positive stock market signs, including easing tariff deadline fears, a technical tradable bottom, and significant investor cash reserves amid overly pessimistic sentiment, potentially setting up positive surprises.
- The Fed’s revised forecasts reflect lower growth and slightly higher inflation, contrasting with a Volcker-era approach, as Powell navigates current challenges differently from historical precedents.
On Thursday, March 20, CNBC’s “Money Movers” welcomed Tom Lee, Fundstrat’s managing partner and head of research, alongside CNBC contributor Steve Liesman to discuss the Federal Reserve’s recent actions and their implications for the stock market. The conversation began with the moderator highlighting Lee’s view that the “Fed put” – a belief that the Fed will step in to support markets – is still active, forming one of four positive signals he sees for stocks this week. Lee interpreted the Fed’s March 19 decision as a pleasant surprise for markets, noting that Fed Chair Jerome Powell’s comments countered recent staff papers suggesting tariffs could have prolonged inflationary effects. Powell’s indication that tariffs might be transitory, Lee argued, positions the Fed to act if labor markets weaken, a stance supported by the Summary of Economic Projections (SEP), where 90% of Fed staffers now see downside risks to GDP growth.
Steve Liesman weighed in, agreeing that the Fed remains poised to support the economy by keeping rates steady rather than signaling hikes. He described the Fed’s delicate balancing act: talking tough on inflation to mitigate the broader impact of tariffs while staying ready to counteract economic slowdowns. Liesman noted that Powell views current policy as restrictive enough to handle inflation, allowing the Fed to focus on potential tariff-related downsides. This was evident in the Fed’s revised forecasts, which lowered growth expectations while slightly raising inflation projections. He contrasted this approach with that of former Fed Chair Paul Volcker, who prioritized inflation over growth, though the moderator pointed out that today’s inflation differs significantly from Volcker’s era, a figure Powell admires.
As the discussion shifted to market reactions, Lee addressed the unease over lower growth and persistent inflation, outlining additional positive signs for stocks. He highlighted easing fears around the April 2 tariff deadline, suggesting that emerging hints of potential deals or delays could relieve investor anxiety, which has been pervasive due to anticipated trade disruptions. Technically, Lee cited Fundstrat’s Mark Newton, who sees a tradable bottom forming after a sharp 10% market drop driven by panic selling, with expanding market breadth signaling stabilization rather than a deeper decline. Finally, Lee pointed to significant “dry powder” among investors, with clients holding substantial cash reserves amid overly pessimistic sentiment – evidenced by recession – like readings in surveys like AAII and Investors Intelligence. He suggested this sets the stage for positive surprises, especially if tariff headlines soften, citing a recent under-the-radar tweet about late-night trade deal negotiations by key figures like Hassett, Lutnick, and Bessett.
The discussion underscored a mix of cautious optimism and strategic Fed positioning, with Lee and Liesman offering insights into how markets might navigate the interplay of monetary policy, trade uncertainties, and investor psychology in the days ahead.
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