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How the Market Works

How the Market Works: Fed Minute Mania

Posted by kdadmin on November 18th, 2015.

How the Market Works: Fed Minute Mania

Let’s see, what will the Fed have cooked up for us today? Will it be more doom and gloom? Will they continue their lack of leadership and maintain their “wait and see” uncertainty? Or will they stone up and be decisive?

We’ll know at 2pm Eastern. Or, actually, we’ll know at about 2:15 Eastern …

By then, the stock market will have had a chance to digest the news. There won’t be a press conference like last month, so the press will have carte blanche to interpret anything in whichever way they want. In other words, conjecture = fear = volatility.

= We’re in cash and bonds. In fact, we’ve been out of stocks since May.

Just look at the market today. So far, it’s run almost up to its year end consensus estimated target of 1.4% gain for 2015. But it’s been here before and usually doesn’t hang around too long. While nobody can predict the future and past performance is no guarantee of future results, if you look at the chart above, what do you notice?

What happened LAST December around the Fed meeting? Right, a sharp 4.8% fall after a recent high. Then,the market recovered to finish just about 1.3% down from that recent high, but is that REALLY a ride you want to go on? I’ve circled the other Fed meetings on the chart. It looks like a coin toss, doesn’t it? Sometimes the market went up, other times it went down. But, if the consensus estimates put the market finishing at a tiny uptick from today’s price, and we still have TWO Fed meetings to get through, with a likely rate hike thrown in there, do you really want to be in stocks?

I don’t.

Especially, when I can always buy back in after the wreckage.

p.s. If you’d like a preview of what happened the last time the Fed’s raised interest rates, have a look at my post, How the Market Works: Federal Funds Rate – Sh** or Get Off the Pot. By the way, the market WAS at 2080 when I wrote that article three weeks ago. Yikes …


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