Aside from the potential for Monday’s U.S. presidential debate having a big impact on the election, “there’s really nothing on the horizon until earnings season, and the Fed has kind of cleared the way for accommodative policy and low interest rate environment which bodes well for stocks”, said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates in Toledo, Ohio.
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The Fed noted, “Economic activity has picked up from the modest pace seen in the first half of the year”.
Baskin’s Schwartz said his clients were starting to fret about the USA election and what the possible outcomes might mean for Canadian investors.
The Fed will hold its next two policy meetings on November 1-2 and December 13-14.
Three of 10 voting policymakers dissented, saying they preferred an immediate hike rather than the deferral until later in the year that most saw as appropriate.
Despite the Fed statement, the Organisation of economic Co-Operation and Development (OECD) has cut forecasts for economic growth for the USA.
“The economy has a little more room to run than previously thought”, Yellen said.
Nonetheless, overall trading activity remained somewhat subdued amid a relatively quiet day in terms of US economic data.
Plus, the presidential election could have a major impact on markets.
“In line with our expectations, the Fed meeting has eased investor fears about an imminent rate increase, bolstering gold”, FastMarkets analyst Boris Mikanikrezai said. The central bank’s so-called “dot plot”, which it uses to signal its outlook for the path of interest rates, showed that officials expected one quarter-point rate increase this year.
In her news conference, Yellen offered a simple explanation for why the Fed didn’t raise rates: The economy can still grow without hurting itself. So much for three/four hikes this year predicted by some world-class experts, including the FOMC members, in December 2015.
Mixed messages from the Fed have caused a great deal of market volatility.
The bottom line is that the USA central bank chickened out again (someone counts how many times?) And the expected path of future interest rates flattened.
In fact, Fed Governor Lael Brainard last week said markets should get used to the idea of rates remaining low for a while. Other reasons are as follows: the USA presidential election in November (usually, the USA central bank tries to avoid, if possible, any major monetary actions as an election approaches), and the belief that we live in a new normal with very low natural rates.
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Here’s what investors should do to protect themselves from central bank action and inaction…
