Today’s the day we find out about the federal reserve rate hike. The stock market has been beaten and battered for the better part of December. Concern over foreign tariffs, higher interest rates, and the overall market slowdown has helped to push the stock price of many companies lower. Where most assume a Santa Claus rally to close markets stronger at the end of the year, 2018 is different.
Wednesday, however, shares of most large-cap stocks traded higher. This followed a bearish trend during the first half of the week. The Dow Jones industrial average gained over 150 points during early market trading. Earnings laggards like FedEx (FDX) and Micron Technology (MU) gave no waver to the bullish move that the market made this morning.
Federal Reserve Rate Hike Decision
The Federal Reserve’s two-day meeting is in the view of many traders this week. Though the policy statement to be released at 2 PM EST is expected to show another rate hike, some economists are thinking that guidance for 2019 will be more dovish.
President Trump has been a staunch opponent of the Federal Reserve for most of the year. His argument has been mainly targeting the fact that the Obama administration didn’t have to deal with anything like this. Though the previous administration was in place during the years of and after the 2008 financial crisis, Trump has different reasoning. Trump has said that by raising rates, it could hurt the economy. Yet this has also been at a time where foreign tariffs weigh heavily on US farmers and manufacturers.
The U.S. Treasury Secretary Steven Mnuchin advised investors that there is likely to be more optimism given the current situation. ”The Fed is damned if they do, damned if they don’t,” Matt Lloyd, Chief Investment Strategist of Advisors Asset Management told reporters.
The U.S.-China trade relations are becoming more favorable among certain economists as the U.S. and China will meet in January to broker a trade-war truce according to Mnuchin. The Trump administration hadn’t given a specific timetable for face-to-face negotiations though.
“Every bull market ends with a Fed policy mistake—it’s just the way it is. The evidence is mounting that we may be on the cusp of that policy mistake, as it appears the Fed has overestimated the strength of the economy amidst several headwinds,” Tom Essaye, president of the Sevens Report wrote in a note to clients.
Time To Watch The Stock Market
With news continuing to offer opinions on both sides of the coin, we watch and wait. Today’s decision from the fed will most likely be (in my opinion) the same that they had explained previously. Will the market trade emotionally? Well, history has shown that traders have had a very short memory so it may be time to saddle up and get ready for another ride.