‘Powell basically told you the Fed put is dead.’
So long, Fed put.
That’s hedge-fund star David Tepper’s takeaway from Wednesday’s market-rattling policy decision from the Federal Reserve and the subsequent news meeting hosted by Chairman Jerome Powell.
Read: Recap of the Powell press conference to explain the Fed’s rate hike and new guidance
Tepper’s “put” comment to CNBC on Thursday morning via email is a reference to the long-held view that Wall Street has enjoyed a Fed safety net in some form or another at least since the October 1987 stock-market crash prompted the Alan Greenspan-led central bank to lower interest rates.
Back then the so-called put — an option that gives the holder the right, but not the obligation, to sell the underlying asset at a set price, serving as a kind of insurance policy against a market decline — has been dubbed the “Greenspan put,” and later the “Bernanke put,” after his successor Ben Bernanke, following the Fed’s aggressive monetary-policy actions in the wake of the financial crisis.
Check out: Why stock-market bulls may soon be complaining about the Fed’s quantitative tightening
Billionaire Tepper, one of Wall Street’s top all-time hedge-fund managers, has been less than bullish in recent months, saying earlier this fall that he’d taken down his exposure to stocks at Appaloosa Management, where he manages some $14 billion.
Read: A ‘Powell put’ for the stock market? Don’t even think about it
Tepper’s comments about the Fed are also notable because it is arguably due to the Fed backstop that the investor made a concentrated wager on the financial system during the 2007-09 financial crisis, correctly surmising that a backstop provided by the central bank would stem the bleeding in that sector, leading him to stellar gains.
On Wednesday, the Dow Jones Industrial Average
DJIA, -1.50%
the Nasdaq Composite
COMP, -1.67%
and the S&P 500
SPX, -1.36%
indexes all sank to fresh lows for the year after investors read the central bank’s latest policy updated as insufficiently dovish, or indicative of a go-slow approach to rate increases.
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Source : MTV
