What the Fed Looks Like When It's Painted Itself Into a Corner
I once almost painted myself into a corner. Really. Actually, I was varnishing a wooden floor in an apartment my wife and I rented many years ago. Maybe it was because the varnish was clear, but I somehow came within a hair of actually winding up in the corner of one of the rooms we were varnishing. Embarrassing.
It looks like the Fed's coming awfully close to being in the same position. Yesterday's announcement of 'no rate hike, but we're on track for future rate hikes' smacked of a central bank that feels it has to stick with it's program in order to retain a semblance of credibility. Such fanfare as accompanied their rate hike in December simply couldn't be ignored. To reverse itself right away would have been embarrassing. And so the Fed may have finally painted itself into a corner. At least that's one way to look at their action and comments yesterday.
The stock market, after some waffling back and forth, decided it wasn't happy with the Fed. Indeed, being the the throws of a rally after it's horrendous New Year start, its frustration at the Fed's position was expressed in a decidedly downward thrust. Does this signal the end of this all-too-brief rally? Well, anything's possible, but it would be somewhat surprising if yesterday's "thumbs down" to the Fed (or was it a thumb in the eye) totally reversed this rally. Technical indicators tell us there needs to be an upward adjustment for a spell. And unless there's some sort of catastrophic crash brewing, we can look forward to a continuation of rising prices in stocks.
Heck, even Apple didn't tumble yesterday prior to the Fed announcement, despite it's announcement that iPhone sales were decidedly down, and not looking good for the future. Frankly, there couldn't have been worse news coming from the world's largest (based on market cap) company. You might have thought Apple would take a big hit on such news. The iPhone's the product that provides the profits for what's looking more and more like a tired behemoth. If iPhone can't sustain positive results, what's next? Well, in lieu of an actual exciting product introduction, what's next is looking more and more like a continuation of Apple's 30%+ decent from its highest close, dramatic enough in itself.
It'll be most interesting now to see which way stocks go in the coming days and weeks. That expected rally took a good body shot for sure. But it may not have been a knock-out blow.
Longer term, and even more interesting, will be what the Fed does next, having, it would seem, painted itself into a corner.
It looks like the Fed's coming awfully close to being in the same position. Yesterday's announcement of 'no rate hike, but we're on track for future rate hikes' smacked of a central bank that feels it has to stick with it's program in order to retain a semblance of credibility. Such fanfare as accompanied their rate hike in December simply couldn't be ignored. To reverse itself right away would have been embarrassing. And so the Fed may have finally painted itself into a corner. At least that's one way to look at their action and comments yesterday.
The stock market, after some waffling back and forth, decided it wasn't happy with the Fed. Indeed, being the the throws of a rally after it's horrendous New Year start, its frustration at the Fed's position was expressed in a decidedly downward thrust. Does this signal the end of this all-too-brief rally? Well, anything's possible, but it would be somewhat surprising if yesterday's "thumbs down" to the Fed (or was it a thumb in the eye) totally reversed this rally. Technical indicators tell us there needs to be an upward adjustment for a spell. And unless there's some sort of catastrophic crash brewing, we can look forward to a continuation of rising prices in stocks.
Heck, even Apple didn't tumble yesterday prior to the Fed announcement, despite it's announcement that iPhone sales were decidedly down, and not looking good for the future. Frankly, there couldn't have been worse news coming from the world's largest (based on market cap) company. You might have thought Apple would take a big hit on such news. The iPhone's the product that provides the profits for what's looking more and more like a tired behemoth. If iPhone can't sustain positive results, what's next? Well, in lieu of an actual exciting product introduction, what's next is looking more and more like a continuation of Apple's 30%+ decent from its highest close, dramatic enough in itself.
It'll be most interesting now to see which way stocks go in the coming days and weeks. That expected rally took a good body shot for sure. But it may not have been a knock-out blow.
Longer term, and even more interesting, will be what the Fed does next, having, it would seem, painted itself into a corner.
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