Why a 50 Basis Point Cut Would Spook the Market

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Whew.

Fed day is finally upon us. 

Steve Skancke, chief economic advisor for Keel Point, sat down with TheStreet to discuss the Federal Reserve, trade and his outlook for the second half of 2019. 

Skancke said that the market is heavily relying on a 25 basis point cut and that anything else could send the market into a tailspin. 

And yes, that's regardless of the current state of the economy which, putting the U.S.-China trade war to the side, is actually pretty strong.

"Job growth remains strong and the economist consensus is for another 170,000 jobs to be added in July. Unemployment remains low and wages are rising. Inflation is slightly below the Fed's 2% target," noted Skancke in an email to TheStreet.

So, why is the market looking for a 25 basis point cut and not a 50 basis point cut, or the Fed to hold rates as they are?

Here's what Skancke had to say:

 "If they cut by 50 basis points, I think that--even with a good case to be made that historically the first cut is always 50 basis points when they cut--that the markets will be a little bit spooked by that. As much as they say they'd like it. I think that they'd be really spooked," he said.

Related. How Investors Can Protect Their Portfolios in the Second Half of 2019