It was supposed to be a boring FOMC meeting, but as a result we have a quite dovish reaction of the markets.
The Fed lowered the real GDP growth at the end of 2025 from 2.1% to 1.7% (Figure 1) and increased Core PCE, but only as of the end of 2025 from 2.5% to 2.8% (Figure 2). The increase in inflation is due to the trade wars and tariffs… and similarly to 2019, inflation is supposed to be temporary. Which may ultimately mean interest rate cuts similarly to 2019… (the result of weaker growth and temporary inflation).
The S&P500 after a 10.13% drawdown (Figure 3) is slowly making up for losses.
Figure 4 shows all 20 drawdowns (from 5% to 10%) since 2009 – which have been recalculated to the S&P500 level on February 19, 2025.
Figure 5 shows the drawdowns from 10% to 15%. And Figure 6 shows the drawdowns from 15% to 20%.
All-in-all, for both the markets and the Fed, the most important thing remains tariffs and the general uncertainty generated by the Trump administration.
Bonus Chart: S&P500 bear markets of 2020 & 2022 (Figure 7).
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