I’m never too excited for Federal Reserve announcements.
I kind of don’t think it’s good that one politically-appointed board and their decisions have such a massive impact on the global economy and the stock market.
But I’m not going to go into a huge rant here…
As I’ve repeated till I’m blue in the face, the markets don’t actually fear lower rates or higher rates, generally. They fear uncertainty and surprises.
I don’t think we’re getting any surprises today.
For that matter, neither do the markets. According to the CME FedWatch tool, traders almost universally expect The Fed to hold rates steady.
Of course, that sets the table for a massive reaction if the Fed does shock us… but that seems extremely unlikely.
So I think today will be more or less a “nothing burger.”
But there’s always the risk that Chairman Powell says something in his press conference to move the markets in one direction or another.
If he’s extremely negative about the future of the economy during the ongoing trade war, that could sway the markets into a more bearish sentiment.
If he’s more positive and suggests rate cuts could be coming soon, that might have an effect too.
But I don’t expect him to be too vocal either way.
We give Powell a lot of grief, and I’m not going to stand here and defend him too much, but he’s got a tough job.
The Fed has, so far, actually seemed to navigate the economy fairly well — maybe reacting too slowly to rising inflation, but not overreacting in a way that forces a recession.
But now, after that job-partially-done, he also has to contend with the barrage of attacks and challenges from the White House — not to mention the tariff regime itself, which is a curveball Powell likely didn’t expect entering the final year of his term at the helm.
His press conference today will have to address all those factors while keeping investors relatively sanguine about the future.
Not an easy task. But I think he’ll manage to do it.
I think next week’s CPI print might actually be the bigger potential market mover, especially depending on the path forward that Powell lays out this afternoon.
For over a year now, the economy has been in a “maybe… maybe… maybe…” sort of range, with no one too confident either way on how healthy it is.
Continued improvement on the CPI front might convince investors that a real recession isn’t an imminent threat. But a big negative move could be a HUGE red flag.
Of course, last week, we saw a pretty big red flag with the new GDP data, and by the end of the day, investors had pushed the market back harder.
So I guess nobody has a crystal ball…
That’s why I think the advice our experts have been giving still holds true: with volatility elevated, shorten your time horizon, get in and out of the market quickly, and let elevated options pricing work for you, not against you.
Anything else, and you’re just throwing darts.
Good luck with the Fed meeting today. If something major happens, we’ll be here to help!
To your prosperity,
Stephen Ground
Editor-in-Chief, ProsperityPub
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