The dollar peaked in January, while stocks and junk bonds bottomed out in mid-February. Several factors played a part: Oil prices stabilized on expected supply cuts and investors began exiting a crowded bet on a rising dollar.

But the most important factor was the Fed's decision to dial back on its plan to raise interest rates a full percentage point this year. On March 16 it signaled it would raise rates only by half that much, if that. This was driven not by any change in the U.S. economic data but by a desire to pre-empt some of the Fed's newfound fears.


It would be too strong to call this a new "Fed put," a commitment akin to a financial derivative that protects investors against losses. Nonetheless, the Fed's new posture suggests a greater willingness to risk inflation breaching its 2% target in order to prevent worse scenarios for the global economy. That's a new--and invaluable--safety net.

Hmm... sounds like this should be called a new "Fed Put"....

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