Wednesday, August 1, 2018

Fed Today: What To Watch

The Federal Reserve comes out with their decision at 2 EDT today. No change is expected but wording will be watched carefully. There is no press conference which also implies nothing major should change.

The stock market is down into the Fed meeting which is a little usual. Usually investors wait for the Fed decision to buy stocks. The Fed day is known to be one of the most bullish days on the calendar over time.

But with the trade news that President Trump is eyeing more tariffs and the tech rout the market's trying to find some direction.

Another issue is the 10 year touched 3% yields today which may be a hint for the Fed decision. ADP came out with a strong jobs report today implying the economy's on fire. The Fed sees that and they feel emboldened to keep their message to continue to raise rates this year.

The flip side though is that PCE price was only up .1% ex-food and energy. That has to spook the Fed because if they raise too much they risk a deflationary spiral. So while that may not come out today, the Fed, because of inflation, may not be able to raise much more.

High GDP and low inflation is a bullish stock market combination. But with the market trading down ahead of the decision it may be looking at the other data points like tariffs and yields to decide.


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