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“ ‘I would not delude myself as an equity investor in thinking there is a “Fed put” any longer. The “Fed put” — for the time being — is gone.’ ”
That was Jason Trennert, a top Wall Street strategist, talking Tuesday about how stock-market investors should understand that the Federal Reserve won’t ride to their rescue in any market hiccup or tantrum.
Investors should sell on some of the strength and not buy on the dips, given the outlook for Fed policy, said Trennert, CEO of Strategas Research, in an interview on CNBC.
The central bank’s officials “whiffed” on their inflation forecast last year and have “no choice” but to tighten now.
Inflation is their primary job, and “the labor market is as tight as a drum,” he said.
Generally speaking, the Fed will have to raise its policy rate above inflation to get it under control, Trennert said.
At the moment, consumer prices are running at 8.5% and the Fed’s policy rate is in a range of 0.25% to 0.5%.
“So there is a long way to go,” he said.
First articulated as the “Greenspan put” in the late 1980s, and then ascribed to all subsequent chairman, the phrase means that the Fed will always reverse policy course or flood the market with liquidity and reassurances in order to keep equities from falling sharply.
A “put” is a financial contract that gives an investor the ability to sell an asset for a set price even if the asset is trading lower in the market.
SPX,
opened lower on Tuesday after a rebound on Monday. The S&P 500 index is down 6% this month and could notch its worst April performance since 1970.
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