Wall St Week Ahead As bear market looms, battered Wall St seeks elusive ‘Fed put’ – Reuters

Wall St Week Ahead As bear market looms, battered Wall St seeks elusive ‘Fed put’ – Reuters

NEW YORK, May 20 (Reuters) - The Federal Reserve's determination to raise interest rates until it squashes the highest inflation in decades is darkening the outlook across Wall Street, as U.S. stocks stand on the cusp of a bear market and warnings of a recession grow louder.

At issue is the so-called Fed put, or investors’ belief that the Fed will take action if stocks fall too deeply, even though it has no mandate to maintain asset prices. One oft-cited example of the phenomenon, which is named after a hedging derivative used to protect against market falls, occurred when the Fed halted a rate hiking cycle in early 2019 after a stock market tantrum.

This time around, the Fed’s insistence that it will raise rates as high as needed to tame surging inflation has bolstered the argument that policymakers will be less sensitive to market volatility - threatening more pain for investors. read more