Is the ‘Powell Put’ Enough to Counter Trump’s Trade War?

(Bloomberg) --

The Federal Reserve has the stock market's back, right? That's what a lot of investors have come to believe. The so-called “Yellen put” (after former Fed Chair Janet Yellen) has rolled over into the “Powell put” (after current Fed Chair Jerome Powell) in trader parlance that likens central bank policy to options contracts protecting against losses in equities.

But what if the Powell put doesn't do the trick this time, and economic data and corporate earnings continue to deteriorate despite interest rate cuts? What if it isn't enough to counteract U.S. President Donald Trump's trade war?

That's one of the topics the “What Goes Up” podcast delves into this week with Alec Young, managing director for global markets research at FTSE Russell.

“Things like housing will respond very favorably to lower rates—a lot of the traditional economic metrics will,” Young says. “But a lack of [capital expenditure] due to trade-related anxiety? CEO, CFO confidence? I'm not sure that's the kind of metric that's as sensitive to a modest reduction in the Fed funds rate. So, given how much markets have run on the back of one positive catalyst, there's quite a bit to lose if the market has maybe overshot its skis a little bit.”

Also joining co-hosts Mike Regan and Sarah Ponczek is Romaine Bostick, a reporter and anchor on Bloomberg Television, to give his take on the state of play in markets, and what he's hearing from sources on Wall Street. 

To contact the editor responsible for this story: Topher Forhecz at tforhecz@bloomberg.net, David Rovella

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