Generational Fed change is significant. We cannot emphasize enough the importance of the generational change in the way the Fed views inflation by fear of lower rather than higher inflation. Last week when Fed Chair Powell was asked what would make him raise rates, he responded by suggesting only an outsized rise in inflation. He followed that up with emphasizing that sustainably low inflation and forward inflation expectations remain below the Fed’s desired 2.0% level and were not transitory. Our translation is that the Fed won’t raise rates anytime over the next year and may lower rates again if there is a meaningful change in their assessment of moderate economic activity. That is a clearly defined “Fed put” for the equity market through sustainably higher valuations.

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