The ‘Fed put’ is gone for now, says Wall Street’s top strategist

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“As an equity investor, I would be under no illusions that there is no longer a ‘Fed put’. The ‘Fed put’ – for now – is gone.


—Jason Trennert, CEO of Strategas Research

It was Jason Trennert, one of Wall Street’s top strategists, speaking on Tuesday about how stock investors should understand that the Federal Reserve won’t come to their rescue in the event of a market hiccup or crisis.

Investors should sell on some of the strength and not buy on the dips, given the Fed’s policy outlook, Trennert, CEO of Strategas Research, said in an interview with CNBC.

Central bank officials “sniffled” their inflation forecasts last year and have “no choice” but to tighten now.

Inflation is their main job, and “the labor market is as tight as a drum,” he said.

Broadly speaking, the Fed will need to raise its policy rate above inflation to get it under control, Trennert said.

Right now, consumer prices are hovering at 8.5% and the Fed’s key rate is in a range of 0.25% to 0.5%.

“So there is a long way to go,” he said.

First articulated as the “Greenspan put” in the late 1980s, then attributed to all subsequent presidents, the phrase signifies that the Fed will always reverse course or flood the market with liquidity and reinsurance in order to prevent stocks from falling sharply.

A “put” is a financial contract that gives an investor the option to sell an asset at a fixed price even if the asset is trading lower in the market.

DJIA Stocks,
-1.03%

SPX,
-1.54%
opened lower on Tuesday after rebounding on Monday. The S&P 500 index is down 6% this month and could post its worst April performance since 1970.

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