U.S. stock markets have made considerable gains over the past month, but investors await the Fed’s next move before feeling confident.
The most recent economic reports have reduced concerns that the United States might be heading for a recession and have helped fuel the benchmark S&P 500 index's 11 percent recovery since mid-February. However, rather than hold interest rates steady, the positive domestic conditions could prompt the Fed to speed up a planned rate increase and throw a damper on the current stock fervor.
The next two-day policy meeting is scheduled for on Wednesday and the central bank is widely expected to hold its key rate steady after hiking it in December for the first time in nearly a decade. However, the Fed has hinted that it may make additional increases before those expected by investors.
Rate Increase Unlikely
According to Walter Todd, chief investment officer at Greenwood Capital Associates in Greenwood, South Carolina "It’s going to be a session with parsing individual words in the statement about how likely the market believes the Fed is to move, how quickly they are going to move for the next hike."
Consumer discretionary stocks have outperformed the consumer staples sector over the past month and this is prompting investors to bet on the Fed keeping rates unchanged for now. According to one analyst, investors are anticipating that the Fed will not take any action and if there is an action it would have a negative effect on the market.
The Fed has kept interest rates at near zero for virtually all of the current bull market for stocks, which marked its seven-year anniversary on Wednesday.