The Fed: What to Expect and How to Respond?
On the financial markets yesterday it was expected to be unchanged. Greed was off the charts, pushing prices in the US stock market to new highs. The earnings season remained the main generator of optimism injections. According to the latest data, among the companies that reported the SP500 (more than half of the companies have already published their reports), 83% exceeded the forecast for profit. Yesterday, Pfizer, Under Armor, DuPont, Estee Lauder and others were pleased with the good financial results.
Despite all this celebration of life, according to the latest CNBC poll, 72% of respondents believe that stocks in the US stock market are overvalued. Recall that the needle that can burst this bubble is the Fed's monetary policy.
In this light, today can decide a lot. If the Fed is expected to announce the start of a reduction in the quantitative easing program (the current consensus is that tapering will begin in November and will amount to 15 billion cuts per month), as well as outline the timing of the start of the rate hike cycle (current expectations are at least September, maximum - June), then the stock the market will not be nice, and the dollar will feel like a king in the foreign exchange market.
But if the Fed takes a position similar to the ECB (last week the European Central Bank pretended that inflation does not exist, and if so, then there is no reason to tighten monetary policy), then those who like risky assets will be able to breathe deeply and continue to buy at the US stock market without fear of the consequences. In this case, you cannot envy the dollar.
In addition, today it is worth paying attention to the data on US employment from the ADP. While they have been at odds with NFP lately, they continue to be an important marker for the markets.
US oil inventories, according to the ADP, rose for the 6th week in a row. Which cannot be attributed to chance or coincidence. In this light, oil sales look quite promising, even in spite of the energy crisis.
Despite all this celebration of life, according to the latest CNBC poll, 72% of respondents believe that stocks in the US stock market are overvalued. Recall that the needle that can burst this bubble is the Fed's monetary policy.
In this light, today can decide a lot. If the Fed is expected to announce the start of a reduction in the quantitative easing program (the current consensus is that tapering will begin in November and will amount to 15 billion cuts per month), as well as outline the timing of the start of the rate hike cycle (current expectations are at least September, maximum - June), then the stock the market will not be nice, and the dollar will feel like a king in the foreign exchange market.
But if the Fed takes a position similar to the ECB (last week the European Central Bank pretended that inflation does not exist, and if so, then there is no reason to tighten monetary policy), then those who like risky assets will be able to breathe deeply and continue to buy at the US stock market without fear of the consequences. In this case, you cannot envy the dollar.
In addition, today it is worth paying attention to the data on US employment from the ADP. While they have been at odds with NFP lately, they continue to be an important marker for the markets.
US oil inventories, according to the ADP, rose for the 6th week in a row. Which cannot be attributed to chance or coincidence. In this light, oil sales look quite promising, even in spite of the energy crisis.
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