Federal Reserve Policy Bolsters Case To Stay With Stocks


  • The case for staying the course with stocks was bolstered following the Fed's pause.
  • As earnings season arrives, technology to power Nasdaq Higher.
  • October can see stock market gains interspersed with sharp volatility from swings in election forecast.
  • November is favorable, but generally driven by the election outcome.

Investors should consider staying the course and maintaining their exposure to stocks. That strategy since March 2016 has served us well."

The above excerpt from our earlier article, Staying The Course! Stocks Remain Attractive, remains a prudent strategy following the Federal Reserve (Fed) action earlier this week.

The Fed Governors at the FOMC meeting left the Federal Funds rate unchanged, providing a runway of clarity for the bond and stock market, at least for the near-term.

The Fed message is that accommodative policy remains the preferred choice at this point, given the weakness in near-term economic data. Faced with multiple key economic data points suggesting slower growth - GDP, ISM surveys, business spending - highlighted in the previous article, we believe the FED's action was a prudent choice.

The rate hike debate has now been pushed out towards the end of the year. The chance of any change at the November 2 meeting is highly remote. The next opportunity for a rate hike will be at the December 14 meeting, and that is the date around which the market consensus is now coalescing. In fact, for the first time this year, the Change Consensus (52%) is higher than the No Change Consensus (42%).

We believe that, (a) in the absence of any political upheaval in the November elections, which can create a fog of uncertainty around economic policy and consequently jolt the financial markets, and (b) with the economic data beginning to ameliorate over the interim period, a December rate hike will be tough to avoid.

Fed Watch - CME Estimate, Graycell Advisors

Source: CME Group

What does it mean for the financial markets?

Stocks, Bonds and Commodities rallied as it became clear that the Fed will remain patient with its accommodative policy, and continue providing the easy money stimulus to enhance economic growth.

Global markets were

This article was written by

Tarun Chandra, CFA profile picture
A healthcare growth portfolio with a record of consistently strong returns

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