‘Lower for Longer’ Is the New Mantra at the Federal Reserve
[showmodule id=”58959″]
The Federal Reserve meets today, with markets expecting its low-rate policy to continue.
Last month, Chairman Jerome Powell gave a major speech at the central bank’s annual conference. The big change was a willingness to accept higher inflation in the short term. That essentially fixes interest rates at their current 0-0.25 percent range for years into the future.
Investors will get details at 2 p.m. ET today, when the central bank issues its official post-meeting statement. Powell follows with a press conference 30 minutes later.
He’ll probably be asked about two other subjects. First, the lack of new stimulus bills from Congress. Powell has urged more benefits to support Americans displaced by coronavirus. Whatever he says in response is unlikely to be new or particularly important.
Second, Powell may discuss the Fed’s desire to boost employment. This also will probably will have little impact on markets because unemployment is still far above normal levels. (The Fed’s new policy of keeping rates low would only take effect when unemployment falls below average.)
As a result, today’s Fed meeting could be a non-event. There are still some things to watch.
Weak Dollar and Technology Stocks
The weakening U.S. dollar has been one of the clearest trends in financial markets since April. The greenback was relatively strong versus other currencies between 2015 and early 2019. But now it’s reeling as the Fed cuts rates and the pandemic keeps Americans out of work.
This has lifted parts of the market like precious metals and global stocks. Gold and silver, for instance, are priced in dollars but are used around the world. If the greenback loses value against other currencies, gold and silver tend to rise in dollar terms.
Another important trend has been the ongoing shift of capital toward China. Market Insights highlighted this story as a key narrative for 2020, and it’s played out as expected. It might even be accelerating as the Chinese yuan pushes to a new 16-month high against the dollar.
Technology stocks have also benefited from the Fed’s easy-money stance because they tend to have higher valuations. That makes investors more willing to pay their high multiples.
In conclusion, Fed meetings have lost a lot of their excitement because officials have clearly mapped out their plans. Still, they can be important events with some impact on markets. Hopefully this article prepares you for today’s statement and press conference.
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial.
Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.
Stocks hit a new record for the third straight month in March, but there was significant rotation away from growth names and technology The S&P 500 rose 3.1 percent, outpacing the Nasdaq-100 by 1.9 percentage points. It was the biggest underperformance in the...
The stock market has been optimistic about inflation since late 2023, but price pressures may be returning as the Federal Reserve considers interest-rate cuts. The price of energy, shelter and materials have quietly risen in the last month. The increases follow months...
What Is Quad Witching? Quadruple witching is an event in financial markets when four different sets of futures and options expire on the same day. Futures and options are derivatives, linked to underlying stock prices. When derivatives expire, traders must close...
Leaving TradeStation
You are leaving TradeStation.com for another company’s website. Click the button below to acknowledge that you understand that you are leaving TradeStation.com.
This event is hosted on YouCanTrade. The information for this event is being provided for informational and educational purposes only.
You are leaving TradeStation Securities and going to YouCanTrade. YouCanTrade is an online media publication service which provides investment educational content, ideas and demonstrations, and does not provide investment or trading advice, research or recommendations. YouCanTrade is not a licensed financial services company or investment adviser and does not offer brokerage services of any kind.
TradeStation Securities, Inc. provides support and training channels hosted on YouCanTrade, its affiliate. Other than these support and training channels, any services offered by YouCanTrade are not sponsored, endorsed, sold or promoted by TradeStation Securities and it makes no representation regarding any YouCanTrade goods or services.
To acknowledge you are leaving TradeStation Securities to go to YouCanTrade, please click
This website uses cookies to offer a better browsing experience and to collect usage information. By browsing this site with cookies enabled or by clicking on the "ACCEPT COOKIES" button you accept our Cookies Policy. To block, delete or manage cookies, please visit your browser settings. Restricting cookies will prevent you benefiting from some of the functionality of our website.ACCEPT COOKIES