Expect Fed to Signal No Rate Hikes Anytime Soon

Expect Fed to Signal No Rate Hikes Anytime Soon

$DIA, $SPY, $QQQ, $RUTX, $VXX

FLASH: Cyclical sectors outperformed, follow-through buying interest came in on no new catalysts. Boeing (NYSE:BA) and Facebook (NASDAQ:FB) extend losses on familiar story lines

Patience is the FOMC’s focus now, signaling that it went too far last year with its 4 rate hikes, so no interest rate hikes likely soon.

The message the Fed is is set to send when its latest policy meeting ends this week is a soothing one. It reflects an abrupt shift in tone since the start of the year in the face of a slowdown in the United States and abroad, persistently tame inflation and a nervous stock market.

The shift toward a more hands-off Fed has pleased investors and encouraged the view that it is done raising rates for now and might even act this year to support aka stimulate, rather than restrain the economy.

In a statement last Wednesday, in updated economic forecasts and in a news conference by Chairman Powell, the Fed will likely note that while the economy is on firm footing, it faces risks from slowing growth and trade disputes. Against that scenario it would be unwise to keep raising rates, as the Fed did 4X in Y 2018.

The Fed is instead set this week to keep its Key short-term rate in a range of 2.25 to 2.5%.

We believe that the FOMC will scale back their projection of rate hikes this year from 2 to 1 or none.

There is also anticipation that the Fed will specify when this year it expects to stop shrinking its huge portfolio of bonds, part of its balance sheet. Doing so would help keep a lid on loan rates. But we believe that will happen in the September/October frame.

Monday, the major US stock market indexes finished at: DJIA +65.23 at 25914.10, NAS Comp +25.95 at 7714.47, S&P 500 +10.46 at 2832.94

Volume: Trade on the NYSE came in at 951-M/shares exchanged

  • NAS Comp +16.3% YTD
  • Russell 2000 +16.0% YTD
  • S&P 500 +13.0% YTD
  • DJIA +11.1% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Bullish in here.

Stay tuned…

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