10 Jan Fed Brings Old News to Market
Stocks are pointed lower in early market trading. However, they are still within the upward trading channel that has driven the market higher for more than two weeks. This move is likely just a technical move lower that will reverse quickly and ultimately drive stock prices higher in the near term. However, if for some reason the move lower pushes prices beneath the current floor, all bets are off. I don’t think that will happen, as I see the stock market rally still having some strength behind it.
Yesterday’s Fed Meeting Minute release wasn’t much of a surprise, considering that Fed Chairman Jerome Powell has already started that the Fed is prepared to soften policies should the economy continue to show signs of weakening. With inflation remaining weak, the Fed stated they will exercise “patience” at future Fed meetings. Contrary to what most economists believe, I continue to feel that the Fed will be reducing interest rates before the end of 2019. You just can’t have a market continue where both housing prices and interest rates continue to climb. Both have already exceeded what would have people at a reasonable debt ratio to own a home. I don’t see the market being able to sustain this upward trend much longer.
Given the continued pressure on the bond market, we will maintain a locking bias.