Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude market...
Will the Fed's Stance Change?
12/12/2014 12:01 am EST
There's been much speculation on what might happen at next week's FOMC meeting and MoneyShow's Jim Jubak is watching for shifts in market positions before the meeting.
For the week ahead, watch, well not the Fed, but how markets position themselves, how investors position themselves, before the Fed meeting on December 16. This is a meeting of the Federal Reserve's Open Market Committee. That's the one that sets rates.
Expectations are not that the Fed will start to raise rates at that meeting, but that it will change the language; that we'll go from something else beside the current formulation, which is rates will remain at their current low levels for a considerable period of time.
The expectation is that the Fed will somehow signal that after the good job growth in October of 240-something-thousand and in November of 320-something-thousand, the Fed will signal that we're getting closer to a point where The Fed might think about raising interest rates sometime in 2015.
The Fed wants to give fair warning so that people can position themselves for an increase that looks like it's going to be somewhere between the first quarter and the third quarter, maybe split the difference and say the second quarter. The question will be two things; one is everyone is wondering what the Fed is going to say. Will it be enough to move markets? If it changes from considerable to lengthy is that enough for a reasonable? Who knows exactly what they're going to do.
The important thing is that the week before the Fed meets is really the only time right now that you've got to position your portfolio to avoid a surprise, so I think you're going to see people making bets to take risk out of their portfolio.
Maybe they'll put on hedges; maybe they'll move out of the more interest rate sensitive parts of the market, they may try to hedge their Treasury bond portfolios. All of that stuff means that we're going to see a lot of activity; none of it very, very aggressive, but a lot of it designed to really anticipate what the Fed might say.
This is the end of the year. You've got a lot of window dressing and portfolio movement anyway, and I think this is going to be a week where we see a lot of that going on and it'll give you a sense of…what the markets do will give you a sense of where the markets think the Fed is going to position itself on Wednesday, December 16.
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