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You're listening to Strictly Business
Podcast with Lindsay Williams.

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The US Federal Reserve concluded its first
meeting of 2026 on Thursday evening

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European time and they

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did absolutely nothing.

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With me now is Philip Saunders who is
Director, the Investment Institute at 91

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in London.

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Philip, they did nothing, the Fed that is,
but the markets did quite a lot or certain

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markets did quite a lot.

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But let's get back to the Fed first.

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They left rates unchanged.

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And from what I can see, Jerome Powell,
the chair of the Fed, did very little

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afterwards with his speech.

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Yeah, I mean, I think that they are sort
of caught because on the one hand,

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the unemployment numbers have been pretty
weak, which is one of the things that

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they're pretty focused on,

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if you like, sort of job creation.

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And the jobs numbers have been unusually,
you know, signalling that growth is very

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weak,

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whereas actually headline growth has been
OK.

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So that's a bit of a conundrum.

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But weak job numbers, you know, possibly
suggesting that the

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U.S. economy is actually going to weaken
is clearly a concern of the Fed, because

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the Fed basically have policy settings
still, you know,

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on the tight side of neutral.

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OK, even though they reduce rates again a
couple of times in the autumn,

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the monetary conditions are still, you
know, actually somewhat on the tight side.

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On the other hand, they remain concerned
about inflation and to actually cut rates

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too much.

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you know, runs the risk of inflation sort
of lighting up again.

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And that's another part of their mandate.

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So it's a sort of balancing act.

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They have chosen to be relatively
cautious, obviously not, you know,

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that's not going to go down particularly
well with President Trump,

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because they want more evidence that
inflation really is coming down.

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The recent numbers have been fantastic,
pointing in the direction of, you know,

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basically inflation being broadly at
target.

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for the Fed.

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So we'll see.

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Obviously, power leaves in May.

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And so it may well be that we sort of sit
on our hands and that the incoming Fed

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chair has to make the decision.

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By then, they will have emphatic evidence
on the inflation front.

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And we believe that inflation is going to
continue to come down and be pretty soft,

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because the labor market is really,

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really actually quite weak at the moment.

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And actually, they really should be
cutting already.

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But the Fed is going to be cautious about
this in the same way that they were

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cautious about raising rates

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when inflation was clearly a problem.

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So, you know, again, basically that calls
into question the way the Fed actually

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takes these decisions.

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But that's another discussion.

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It's a tricky situation, isn't it?

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I mean, clearly you're in the Trump camp
too late, Powell, I think he calls him.

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So your proponents of rates being cut
because inflation is under control.

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But on the other hand, as you quite
rightly point out, here we've got.

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an unusual situation where the
unemployment rate in the United States, I

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think, is 4.4%, which is a four-year high.

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And we've got growth at 4.4% as well, I
think, or 4.3%.

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Anyway, they're very close.

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But with a president breathing down your
neck and all these other things, he

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decided just to sit on his hands.

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And what really sort of frustrated me last
night, before we get off this topic, is

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that he didn't give any guidance.

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He just said, it's going to be
data-driven.

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Well, we know that.

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So...

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It's a bit of an opt out.

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So the Fed basically is sort of, you know,
operating the way the Fed does.

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He's basically ignoring any pressure being
put on him by other parties, including the

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president.

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And, you know, they are basically going by
the book, the Fed's book.

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Whether the Fed's book is right or wrong
is another matter.

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But that's what they're doing.

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So he's basically sitting on his hands and
he's going to sort of ride his period out.

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probably you know Unless the evidence on
the unemployment front is really negative,

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sort of between now and the next review in
March, then, you know,

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he will basically sort of not change short
term rates and leave any decision to his

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successor.

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The market, of course, knows better than
we do.

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The US 10 year bond, as we speak, as we
pre-record, is 4.271 to be precise.

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So it's ticked up.

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The yield is ticked up, therefore the bond
market coming down.

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The US dollar, having been slightly
stronger straight after the decision,

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has now turned tail and gone weaker again.

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The gold and silver prices and other
commodities have soared, notably gold,

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which is above $5,600 an ounce.

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But that's not so much a Fed story or a
dollar story.

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That's more of a geopolitical story, isn't
it?

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Well, I think it is a bit of a dollar
story as well.

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But yes, I mean, gold has done
extraordinarily well.

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It was up over 60% in dollar terms over
calendar 25.

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People in the market thought that that was
enough and it was going to correct

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significantly, and it just didn't.

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It kept on going up.

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And what that signals really, I think, is
that it was, you know,

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the move in gold was originally generated
after Russia's invasion of Ukraine back in

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2022.

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And thereafter, central banks, not just
the usual suspects in terms of the Russian

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Central Bank and the Chinese Central Bank,

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have been, you know, avid acquirers of
gold.

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The investment community has largely
ignored that and now finds itself short.

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It hasn't really been sort of present at
this particular party.

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And there's not a lot of gold.

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Essentially, if investors more generally
decide, you know, that they should have

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some gold in their portfolios as a hedge
against this

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uncertain world we live in currently, then
that can overwhelm the supply of gold.

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So I think that's what we're seeing.

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We're seeing a squeeze.

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And that's got considerable momentum now.

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We're now seeing basically.

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retail appetite emerging in ETFs and so
forth.

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So the bandwagon goes on.

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And of course, silver is a sort of adjunct
to all of this.

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It's more serious because it basically is
an industrial input into things like solar

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panels.

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And so the silver price has just gone up
sort of 50% or so over the last six weeks.

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That will have a significant impact in
terms of in the real world, unlike gold.

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What next, Philip?

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The S&P 500 and the NASDAQ, the S&P 500
sort of treading water around that 7,000

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mark.

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More interested, I think, in big tech
earnings.

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But what's your guidance for the future?

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Never mind the Fed.

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What about you and 91?

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Well, I think that, you know, we believe
we remain in a cyclical bull market for

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equities.

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And we believe that that is supported by
earnings growth.

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So we would expect earnings outcomes in,
you know.

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that are going to be announced or the
process of being announced to be pretty

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constructive.

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And, you know, provided you've got that
undertow, then that's actually pretty

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supportive for equity markets,

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even though bond markets seem to be sort
of stuck at this particular level, as you

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observed earlier on, just over 4%

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of the 10-year US Treasury.

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The interesting thing that's happening
also is that the market is broadening.

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So it's no longer only Magnificent Seven.

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You're seeing cyclical stocks performing
pretty well.

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And you're seeing international stocks
performing pretty well.

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And so that's a sort of reasonably
constructive sign.

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And provided it continues to be supported
by positive earnings growth and sort of

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better economic

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numbers on the growth side, and inflation
basically showing signs of continuing to

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cool,

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that's a pretty good combination.

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Liquidity is pretty supportive too.

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Philip, thank you very much for your
analysis.

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Philip Saunders is Director at the
Investment Institute, 91 in London.

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The views and opinions expressed in these
podcasts are those of Lindsay Williams and

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various contributors and do not reflect
the policy,

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position or opinion of any other agency,
organisation,

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employer or company associated with
StrictlyBusinessPodcast.com.

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Assumptions made on the analyses are not
reflective of the position of any other

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entity other than the speaker or the
author.

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And since we are critically thinking human
beings, these views are always subject to

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change, revision,

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and rethinking at any time.

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Please do not hold us to them in
perpetuity.
