No hikes for the foreseeable future – US Market Wrap

– The world’s biggest bond market surged after Fed’s Powell downplayed the possibility of rate hikes and the Federal Reserve said it will shrink its balance sheet at a slower pace in a bid to ease strains in money markets.
– Treasuries rose across the U.S. curve, with two-year rates falling below 5%. Swap traders increased their bets on rate reduction, with higher odds that the first change will occur in November rather than December. Stocks lost gains as chipmakers fell.
– Fed officials opted to keep the benchmark rate at 5.25% to 5.5% for the sixth consecutive meeting. Officials also discussed efforts to slow the central bank’s asset portfolio reduction. Beginning in June, the Fed will reduce the maximum on Treasuries runoff to $25 billion each month from $60 billion, in an effort to reduce the risk of financial-market instability caused by the previous round of balance-sheet cutting in 2019.
– Wall Street lore holds that traders should sell equities in May to avoid the summer slump. However, such method appears to have been a failure in recent memory.
– The classic Wall Street adage “sell in May and go away” refers to the six-month period from May to October, which has historically been the worst time to own equities – but that has not been the case lately. In fact, the S&P 500 has increased in eight of the previous ten years over this time period, with an average return of 4%.