Investors are preparing for the Federal Open Market Committee (FOMC) scheduled for Wednesday, May 3-4, 2022. Stocks have been sold down to a level that may have discounted some of the bad news most expect. Is it enough? Could a couple of days around May 4th see a re-test of this year’s lows? It depends on how hawkish the Fed is prepared to be. Expectations are now for a 50-basis point hike in the week ahead, and two more in the next two monthly meetings. The markets are also expecting a substantial reduction in the Fed’s multi-trillion-dollar balance sheet. That…
Insights & Advice
Tag: Federal Reserve Bank
Stocks bouncing in a box
Over the next three weeks, equities will likely trade in a wide range. The caveat to that forecast: if the Fed suddenly changes policy, or if a shooting war erupts in Ukraine. Those are two big ifs. Unfortunately, I can neither forecast when or what the next Fed head will say, nor predict Vladimir Putin’s next move. The next Federal Open Market Committee (FOMC) meeting occurs in mid-March. The latest CPI and PPI inflation data show inflation accelerating at a rate much higher than economists and the Fed expected. It is all but certain, according to the bond market vigilantes,…
Markets are trading like a penny stock
Two major events this week had investors rushing from one side of the boat to the other. The bond auctions, followed by the Consumer Price Index report, were both surprises in the opposite directions. Neither could keep the markets up. On Wednesday, February 9, 2022, the government held its usual U.S. Ten-Year Treasury Bond auction. Bond traders were fearful that investors, especially overseas bidders, would shun the auction, due to inflation fears. Instead, bidders gobbled up the offerings with foreign purchasers accounting for more than 70% of the buyers. The next day, the 30-year bond auction was so-so at…
Fed’s meeting notes throw markets a curve
Investors were set back on their heels this week (January 3-7) after reading the latest member comments from the Federal Open Market Committee’s December 2021 meeting. It suggests that the Fed is prepared to tighten far sooner than most expected. Members seemed to say that the Federal reserve bank central bank was prepared to shrink its $9 trillion balance sheet “much sooner and faster” than anyone expected. This is in addition to the already-announced plan to reduce its asset purchases faster than they first planned. Couple that with expectations that we could see three interest rate hikes this year and…
Want equality? Start with better jobs
Jobs. They are the primary focus of the Federal Reserve Bank, the Biden Administration, the Republican opposition, and most U.S. corporations. Supposedly, with all this high-powered attention, we still can’t find enough workers to fill all the positions available. Has anyone questioned why? One important reason might be that 60% of jobs in the U.S. are considered “mediocre” or “of poor quality,” according to a recent Gallup survey. If you combine those findings with the fact that many workers in the service economy are poorly compensated, the problem begins to come into clearer focus. If you listen to the free…
Rising rates create headwinds for stocks
The saga of rising interest rates in the long end of the U.S. Treasury market continued this week. Investors, fearing runaway inflation, sold both bonds and stocks. Will the selling continue, or is this a buying opportunity? It depends upon which asset class we are talking about. Yields on the 10, 20, and 30-year U.S. Treasury Bonds, I believe, will continue to rise. How far? It is possible that the benchmark “Tens” could finish the year at 2%. In the short-term, however, I expect yields to fall a bit on profit-taking. Last week, I warned readers that the rise in…