(Bloomberg) — The bond market is losing confidence in the Federal Reserve’s policy tightening projections after a punishing stretch for U.S. stocks.
Traders pared wagers on 2019 rate hikes last week as disappointing corporate earnings helped drag the S&P 500 Index down 10 percent from its record high at one point Friday. Markets are now factoring in fewer than two quarter-point hikes for next year, compared with the three increases that policy makers project. Tanking inflation expectations suggest some investors already deem Fed policy too restrictive.
Meanwhile, back on the equity farm, S&P500 valuation is near the “cheapest” since 2016.
And yes, inflation expectations are cooling.