Just three months ago, investors were in a panic over the idea that the Federal Reserve could push borrowing costs too high and tip the US economy to a recession.
Now, Wall Street compares with the idea that the central bank could actually lower interest rates by the end of the year.
These forecasts are evident in the market for interest rate terminals, where the odds for another interest rate increase in 2019 have fallen to zero, from approx. 30 percent in December, while the chance of a fall in interest rates has increased to more than one in five.
A reason for changing forecasts? The Fed's own signal to be more patient when considering whether to keep interest rates. Since central bank governor Jerome H. Powell first talked about this newborn patience, stocks have increased more than 15 percent.
"There has been a difference between day and night, the outlook for the shares goes from December to the first quarter of this year," said Chris Rupkey, CFO of MUFG Union Bank in New York. "And I think you can say that the Federal Reserve policy was very important in supporting the stock market."
The Fed was able to add more fuel to this collection Wednesday when the central bank closed its last monetary policy meeting. It is expected that the interest rate will be untouched and further emphasizes that it has nothing to do with lifting them.
The central bank is not the only reason why the market is up. Some analysts point to rising hopes for a US and China trade agreement to help lift key technology and industrial stocks.
But sectors that are sensitive to interest rates – small companies where borrowing costs make a significant expense, and homebuilders and automakers whose customers rely on finance – have made some of the bigger gains in this collection.
These increases have even come as economic growth forecasts have shown concern for a slowdown. Economists expect the US to grow at an annual rate of below 2 percent in the first quarter, down from 3 percent growth in 2018.
And stock analysts have continued to downgrade their expectations of profits this year. Since the end of 2018, the results estimates for companies in S & P 500 have fallen 3 per cent, according to FactSet, a financial data provider.
Investors who have so far outsourced the 2019 rally due to concerns about finances or profits can come to the idea that it is a mistake to do so when the Fed is clearly the primary driver of winnings.
Last week, more than $ 25 billion rose to funds buying US stocks, EPFR data show.
"It may be that the hunt is on," said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch. "People could suddenly say," I have to get involved. ""