Wall St Week Ahead- RPT-Even if the reduction of the Fed is a given, Powell is perceived as a joker for the stock market

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By Sinéad Carew
NEW YORK, July 26 (Reuters) - President of the US Federal Reserve
Jerome Powell will have to walk in a thin line to avoid rolling
next week, even if the central bank delivers its
expectations and lowers interest rates for the first time
more than a decade.
Investors are betting that the Fed will probably reduce the
rate of 25 basis points in a range of 2.00% to
2.25% at the end of his two-day meeting on July 31st.
launches first round of full-rate easing since September
2007, when the financial crisis began to take shape, or more
Limited push of "insurance", is far from clear.
Anyway, the S & P 500 has always seen a rise
months after the start of the Fed's reduction cycles, even the
pair of mini-cycles in the mid-1990s.
But with the benchmark already up 20% since the beginning of the year
partly because of rate reduction forecasts, a quarter-point reduction may not
be enough to develop or even maintain the gains of 2019. Instead,
the market will look at Powell's opinion on the economy and clues
about his appetite for other cuts.
"You will see a lot of volatility in the ad
at the end of the press conference because investors are
will badyze every word, "said Paul Nolte, portfolio
Director at Kingsview Asset Management in Chicago.


Many are looking for Powell to report more rate cuts. For
For example, if Powell says his next steps will be guided by
numbers, this may suggest an open mind about future cuts, says
JJ Kinahan, chief market strategist at TD Ameritrade. But if the Fed
Chief also comments on the progress made in the economy,
erode the hopes of mitigation.
"We are limited to the upside, but it could mean a lot of
things that are badly received. What he says and how it is
interpreted could be what disappoints, "Kinahan said. Each
the word must be perfect. It is a difficult line to walk. "
Reading Friday stronger than expected second quarter
The gross domestic product of the United States will certainly add weight to the
the argument that a complete easing cycle might not be warranted
now. How Powell characterizes the Fed's actions against this
the backdrop is the key.
Quincy Krosby, Chief Market Strategist at Prudential
Financial in Newark, New Jersey, says investors will seek
Powell to mention again "cross currents" in the trade and to say
he will do what he can to keep the expansion intact.
Nevertheless, after the meeting, you may find that the market
take a break and consolidate while waiting for the next
catalyst, "said Krosby, who sees in a trade deal between China and China the
next big catalyst.
Even if the short-term reaction is muted next week, the story
shows a positive long-term trend for equities after the
beginning of a rate reduction cycle.
Since 1954, the S & P 500 has increased on average by 14
percent within 12 months after the Fed started cutting rates
cycle, according to Audrey Kaplan, head of global equities
strategy at the Wells Fargo Investment Institute.
The S & P fell within 12 months of the start of
three of the 16 cycles of easing. In two of these periods - 2001 and 2001
2007 - The economy was already on the brink of a recession
the cycle began, according to Kaplan.
But Kaplan does not see a recession in the horizon
time. Instead, she hopes an economic boost from a rate
cuts or subsequent cutting signals.
"Rates are very low this cycle.It is very different from the
other cycles, but the low rates and the lowest rates could be good for
the expansion of the business cycle, "she said.


Interest rate traders are betting that a rate cut of
less than 25 basis points is a certainty, according to the CME group
Fedwatch. They predicted a 19.4% probability of 50
reduction in points, which would reduce the target rate range of the Fed to 1.75%
at 2.00%.
While some investors would like a reduction of 50 basis points on
Wednesday, others fear that the Fed will reduce two notches
only if he sees something more disturbing in the economy.
"The market does not like surprises.
but with such a low probability, the longer-term issue
would be: "What do you see we do not see?" said
Kinahan of Ameritrade.


(Report of Sinéad Carew, graphic and complementary report of
Richard Leong; Edited by Alden Bentley, Dan Burns and Dan
Grebler)