Stocks are likely going to be stuck in a trading range until the next Fed announcement on Wednesday February 1st.
Because investors have been burned many times before getting bullish in hopes of a Fed pivot that did not arrive.
So even with signs of moderating inflation providing a modest lift to stocks of late…there is a limit to the upside until investors hear from the Fed again. There is also limit to the downside. And this begets a trading range.
Let’s discuss the shape of the trading range and possible outcomes after the Fed announcement. All that and more is on tap for this week’s Reitmeister Total Return commentary.
In many ways the trading range has already been in place for the past month flitting between 3,800 and 4,000 for the S&P 500.
And this is likely to stay in place as investors are fearful of reading the Fed tea leaves wrong as they have so many times this year. So even though there were welcome signs of moderating wage inflation (public enemy #1 to the Fed) there are enough whispers from the Fed that their job is far from done.
One such whisper from the Fed recently came from Atlanta Fed President, Ralph Bostic. During his speech he shared that interest rates will get above 5% and hold there for a while. He was then asked for how long would they remain elevated above 5% for which he stated emphatically. “three words: a long time”.
This harkens back to December 14th when the market was on the verge of a breakout above the 200 day moving average before Powell slammed the door on that notion. He too repeated the 3 word mantra (a long time) over and over again when discussing their plans for higher rates. Continue reading "Are Stocks Stuck in a Trading Range til February?"