Market Direction Mid Week Update©

Market Direction: BULLISH alert issued 11/10/2016

The Federal Reserve announced Wednesday that it held its benchmark interest rate after a two-day policy meeting, as had widely been expected.

It added that the recent slowdown in growth is likely temporary.

"The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2% over the medium term," the Federal Open Market Committee said.

"While the Fed acknowledged the slowdown in the economy and consumer spending during the first quarter, they also view it as temporary. In other words, they expect to continue raising interest rates – and the next hike may come as soon as June," Greg McBride, Bankrate.com’s chief financial analyst, said in an emailed statement. 

The FOMC kept the benchmark federal funds rate at a range of 0.75% to 1%, following the 25 basis point increase in March.

Most market-watchers expect the Fed will raise rates again at its June meeting. Even with a weaker-than-expected jobs report in March, policymakers can look at the labor market's relative long-run strength as evidence for continuing hikes. 

"The Fed’s reaction function has changed significantly from the last two years as it appears to be firmly on a policy normalization track and is not reacting to every piece of high frequency economic data. It would take a dramatic slowdown in the economy to derail the Fed’s normalization plans," Roiana Reid of Berenberg Capital Markets said in a note.

"The Fed is likely to raise rates at its June and September meetings, before announcing a change in its balance sheet policy late in the year," she argued.

The market's expectations for a hike in June jumped to 97.5% after the FOMC announcement, up from about 69% earlier on Wednesday, according to the World Interest Rate Probability data provided by Bloomberg.

Here's the full Fed statement:

Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen even as growth in economic activity slowed. Job gains were solid, on average, in recent months, and the unemployment rate declined. Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid. Business fixed investment firmed. Inflation measured on a 12-month basis recently has been running close to the Committee's 2 percent longer-run objective. Excluding energy and food, consumer prices declined in March and inflation continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 3/4 to 1 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. 

The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at  $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.

The all-time highs since our initial recommendation to go LONG this market. Here is how the markets have performed:

Stock Market Direction Recommendation (11/10/2016)
Dow	up 2,361.23 points a 12.55% gain	3/1/17
Nasdaq	up 893.92 points a 17.16% gain	5/2/17
S&P 500	up 233.50 points a 10.77% gain	3/1/17

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