S&P 500 – Bulls await Fed’s decision tomorrow….

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With the Trump-Kim summit now underway, investors are already looking elsewhere for market clues.

The most important one is the Fed monetary decision tomorrow (Wednesday). Investors are generally anticipating a small hike of 25bps to 2%. While this is by no means a large move, markets are expecting more rate hikes later this year. So the cumulative impact of the tightening will be an ongoing rise in borrowing costs.

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Monetary tightening by the Fed is leading to new market trends: (a) A consistent outflow of US gov bonds, leading to a sharp rise in yields. (b) A rise in USD. (c) A deterioration of many EM currencies (e.g. Turkish Lira, Brazilian Real, Argentina Peso).

In the stock market, however, optimism continues to outweigh negative sentiment. The S&P 500 Index, for example, is still havering near its multi-month highs after a bullish breakout last week. The bulls are obviously aiming for the 2,800 resistance level. Depending on what the Fed says tomorrow, a break above this ceiling is not to be ruled out this week.

 

 

 

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Jackson has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.

Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.

Jackson has a PhD in Finance from Durham University.

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