The Fed raised rates for the ninth time, only lowered expectations for 2019 hikes from three to two, and did not adopt a more dovish tone in its press release. The financial market reaction to the FOMC decision speaks for itself: long-term US Treasury (UST) Bond yields dropped, credit spreads widened, the 2- to 10-year UST yield curve flattened to just 11 basis points, and the major market indices dropped to new 52-week lows. One would be very hard pressed to suggest it was a good decision by the Fed given (1) the slowing global growth, (2) potential trade war with China, (3) weakening domestic economic data, (4) collapsing oil prices, (5) sharp drop in inflation breakevens, and (6) guidance from companies like Federal Express. That said, the cumulative reaction in the equity markets to an unfriendly Fed over the past two months appears overdone.

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