The Fed, Stock Market Uncertainty And Volatility

The Fed, Stock Market Uncertainty And Volatility

$DIA, $SPY, $QQQ, $VXX

Ok, for the 55th or was it the 56th FOMC meeting running that the policy makers did not tamper with interest rates, other than jawbone the issue on Wednesday.

Oh, but the did refined and tweak the domestic economic assessment, and eased some concerns about the external economic and financial environment.

There are some things you really need to know about the FOMC’s announcement, as follows;

1. Of Key import to markets is that a decision to raise interest rates for the 1st time in almost 10 years is now, according to them, a possibility at the December policy meeting they might ‘liftoff” Zero+. And, notably, the central bank refrained from providing specifics about the elements that would drive the decision.
2. The message conveyed more unity among its policy makers, just 1 member of the FOMC, Jeffrey Lacker, the President of the Richmond Fed, dissented. The near unanimity was an important accomplishment by Chairwoman Janet Yellen, especially given the wide range of views expressed leading up to that meeting.
3. Many participants in the markets grown comfortable with the idea that the Fed would delay a hike until Y 2016 are adjusting. The result will be higher interest rates, especially for shorter maturity Treasury bills, and a stronger USD. But, they do this regularly, till they re-adjust, when they learn the rate hike is not going to happen.
4. The Fed statement does little to help shift the market away from it focus on the timing of the 1st rate hike and toward a focus on the bigger picture.
5. What is likely will be the easiest tightening in Fed history when it comes to the irregular pace of the hikes and the ending point of the rate-increase campaign if ever or any.

Now, the markets will obsess about the next Fed meeting, focusing more attention than the event deserves. So, in the weeks leading up to the December meet, each new release of fresh economic data and Fed speakers, and there are many to come, will be a catalyst for higher market volatility.

Stay tuned…

Paul Ebeling

HeffX-LTN

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