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Home / Business / Here's the most counter-trade on Wall Street – and investors can thank the Fed, Bank of America says

Here's the most counter-trade on Wall Street – and investors can thank the Fed, Bank of America says



Remember that the time when the Federal Reserve was busy calling up benchmark rates to normalize crisis-open monetary policy? Well, Wall Street does not, after a 180 degree pivot on Wednesday by Powell & Co. who sent expectations for future interest rate increases to rock bottom levels – at least for the moment.

Bank of America research analysts on Friday described interest rate hikes in 2019 as the "most counter-productive" investment game in the world, in a popular "flow show" research report entitled "Long Risk, Long Influence, Short Volume".

Analysts at the Bank of America Merrill Lynch, led by Chief Investment Strategist Michael Hartnett, said "consensus [is] is now rushing back to" low-growth, low-speed "playbook of long-term credit [emerging markets] growth stocks.

So far, it has contributed to further boosting a stock market that was already on the rise after a terrible few months at the end of 201

8. It is the violent market reaction that resulted in the worst annual return for the Dow Jones Industrial Average

DJIA, -0.02%

S & P 500 indexes

SPX, -0.20%

and Nasdaq Composite Index

COMP, -0.48%

since 2008.

On Wednesday, the plain Powell made a conscious case for no further interest rate increase, which contained federal fund futures prices in a range of 2.25% 2.50% as expected. What was not expected was the bold attitude.

Before Wednesday, the Fed had suggested that three rate hikes were likely, and as recently as December pointed to two rate hikes most likely.

Now it is not clear whether there will be hikes, with some market participants arguing that decision makers either plunge into the market's reaction to consider hiking and relax their $ 4 trillion balance or show poor leadership.

Read: Opinion: This is the year when the Federal Reserve's credibility finally died

Also read: MarketWatch's Snapshot of the Market

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