The start of 2019 has been a polar opposite in the stock market than what had been seen at the end of 2018. The bull market has turned 10 years old, and the Federal Reserve has turned its stance from being overly hawkish to a much more dovish bias and outlook on interest rates.

Ahead of this Wednesday’s decision on interest rates from the Federal Open Market Committee (FOMC), expectations are that the FOMC will keep interest rates flat with the target range of 2.25% to 2.50% for Fed Funds. What is also expected is for a dialing down of estimates for future interest rate hikes.

The reality is that economic growth has continued throughout the market turbulence of 2018 and during the first quarter of 2019. That said, it has been far weaker growth. Many large public corporations have seen much more muted growth than investors had been seeing, with international issues around trade wars and the run-off of the huge corporate tax-induced gains.

The trade war with China is one issue, but Brexit and weakening international metrics are adding to the Fed’s newly found dovishness. The European Central Bank even had to keep its pledge of buying bonds under quantitative easing and it dialed down its inflation and growth forecasts for Europe in 2019.

With equity prices continuing to rise, investors are waiting for possible additional information regarding the composition and runoff time period expectations of the Fed’s massive balance sheet. The Fed’s total balance sheet was last seen at almost $4.02 trillion — down about $429 billion from a year ago.

Treasury yields have started ticking higher, but the 10-year is now almost flat with the end of 2018. Gold prices have risen, while the U.S. dollar is lower and when crude oil prices have been hitting highs not seen since last November.

The most economic recent data in the economy came with tame retail sales, softer job creations, factory orders under expectations, and year-end GDP that is far shy of that old 3% growth goal. Just last week, the GDPNow’s latest forecast rom the Federal Reserve Bank of Atlanta was calling for first quarter GDP growth of a mere 0.4%. The ‘Nowcast’ from the New York Federal Reserve was last seen at 1.37%. Both numbers are routinely revised up or down, but there are just over 10 days remaining in the first quarter of 2019.

Using the FedWatch tool from the CME, the March decision was being given a 98.7% probability that Fed Funds will be held steady. That same tool, as of March 19, shows that the Fed Funds range will also be in the same 2.25% to 2.50% range by the end of July with an 86.5% probability. Even the December 2019 FOMC meeting is now handicapped at a 74.5% chance of being at the 2.25% to 2.50% range.

The market did not react in time for the Fed’s unofficial third mandate, when we said that Jerome Powell had finally blinked, at the end of November.

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