Goldman Sachs analysts claim that the last 25 years of history shows that the Federal Reserve will stick fast to its current path of interest rate hikes, despite a recent sell-off in stock markets.
U.S. futures suggested there would be a return to buying when markets open Wednesday but global trade tensions and concerns over the tech sector growth have driven "risk-off" sentiment lately. Following Tuesday's session, the Dow and the S&P 500 had lost all gains previously made during 2018.
The underlying U.S. economy is still going strong however, adding 250,000 jobs in October and growing at an annualized 3.5 percent during the third quarter.
President Donald Trump said Tuesday that he fears rising interest rates could choke off growth and that the Fed should consider reversing course.
"I'd like to see the Fed with a lower interest rate. I think the rate's too high. I think we have much more of a Fed problem than we have a problem with anyone else," Trump said to reporters outside the White House. "I think your tech stocks have some problems," Trump added.
But new analysis from Goldman Sachs suggested that the Fed is unlikely to roll out more accommodative policy just because stocks are tanking.
In a note released late Tuesday and partly penned by Goldman's Chief Economist, Jan Hatzius, the investment bank suggested the Fed would need to see a bigger fall off in U.S. financial conditions before listening to the calls from Trump and others.
"Looking at all signiﬁcant stock market declines since 1994, we ﬁnd that the Fed responds with more accommodative policy only when other ﬁnancial conditions such as credit spreads also deteriorate substantially or when growth is below potential," the research said.