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The Fed left interest rates unchanged — five experts on what they're watching now


The Federal Reserve left interest rates unchanged Wednesday at its December meeting, just as markets expected.

Stocks did get a pop, though, after the central bank indicated slim chances of a rate change in 2020.

These experts weigh in on what they're watching now.

Mona Mahajan, U.S. investment strategist at Allianz, says there are two things on her radar.

"There's a couple things on the table there. One, we have U.S.-China trade, like we talked about. It's still out there, Dec. 15 is still a key date. We don't know clarity or don't have clarity around that. And number two, it's interesting that since they last met, we've had the shift in market sentiment that perhaps we're in this bottoming process in the economy, perhaps next year we'll see a mid-cycle reflationary story. And so I'm wondering if the Fed is also alongside the rest of us watching to see if the data proves that out, and I think that will be key."

David Kelly, chief global strategist at J.P. Morgan Asset Management, says the trade war remains a major impediment to the markets and a possible spanner in the works for the Fed.

"I think the best we can hope for here is a fragile ceasefire rather than a durable peace. And that's really the problem because global business is holding back on investing because they don't know what the rules can be around trade. And I think that the [Trump] administration seems to think that if the markets go up on rumors of a trade deal, that's a positive. I think the real positive is having some certainty around that. I think you have to get past the 2020 election for that. So I think that's going to be an anchor on both global interest rates, frankly, and on the global economy over the next year."

Jim Caron, global fixed income portfolio manager at Morgan Stanley, says one area of the market is being neglected.

"I'm very uncomfortable with this Fed statement and even with the way that things are being addressed right now, because effectively what the Fed is saying is that they're going to let the economy run hot. Okay, that sounds great, but I'm a fixed-income investor. So what does that mean for me?"

Frederic Mishkin, Columbia University economics professor and former Fed board governor, is concerned that the economy could be running too hot.

"I actually tend to worry more about this issue that running ... this high-pressure type of economy could actually cause problems at some point in the future ... There's a view that's very clearly stated — Jay Powell has stated it — is this, that the Phillips Curve seems to be dead, that the tight economy is not producing any inflation and actually research that I've done indicates that that view may be not really quite correct."

Josh Brown, CEO of Ritholtz Wealth Management, says the market got exactly what it wanted here.

Powell "addressed the plumbing, the money market fund issue. We heard about the funding markets, the short-term markets. Great, there wasn't really much ado about that lately anyway. And then they put out the 2020 outlook which 2% growth, 3.5% unemployment, which is down from what they said in September. ... There's not really anything else to put into a headline here, and I'm telling you, the market is fine with that, it's perfectly fine, we're all good."