It's all about the Fed!
Robert R. Fragnito
Chief Operating Officer | Financial Advisor | Portfolio Manager at MCF Capital Management, LLC
U.S. stocks finished higher on Monday as investors prepared for the Federal Reserve's March policy meeting mid-week.
Daily Market Commentary will be off on Tuesday and back on Wednesday in time for the Fed decision.?
Stocks?traded in positive territory for most of the day but fell below their intraday highs. Investors on Monday traded ahead of critical central bank?decisions?from the U.S. Federal Reserve and the Bank of Japan.?
Artificial Intelligence (AI)?developments largely encouraged the day's upbeat sentiment as chipmaker Nvidia Corp. held its annual developers conference on Monday, featuring a speech by CEO Jensen Huang after the closing bell.?
Later in the week, the?Federal Reserve?is expected to keep interest rates unchanged after its two-day policy meeting on Wednesday. Fed officials will also publish their "dot plot," a graph representing their expectations for interest rate policy, as part of the central bank's quarterly Summary of Economic Projections.?
The?Bank of Japan?is expected to end its negative interest rate policy on Tuesday.
Economic data was light on Monday. The only significant release was March?home-builder confidence, which increased to 51,?its highest level since July 2023.?
U.S. Treasury yields?moved slightly higher on Monday as traders awaited the outcomes of central bank decisions this week. Action in the Treasury was relatively subdued compared to last week's run-up. The closely followed?10-year yield?rose 3.6 basis points to end the day at 4.339% from 4.303% on Friday.?
Oil futures?continued rallying, up at a near five-month high, as the news of Ukraine's drone strikes on Russian refining facilities heightened geopolitical concerns.?WTI crude?rose 2.1% to $82.72 a barrel on NYMEX, while the international benchmark?Brent?rose above $86 on Monday.?
Metals?were mixed on Monday, with gold and aluminum relatively flat, while copper prices exceeded $9,000 a metric ton.?Copper?prices advanced on better-than-expected industrial production and investment data from China, the metal rose 5% weekly.?COMEX gold?rose 0.16% to $2,160.70 a troy ounce.?
The?U.S. dollar?was higher ahead of several global central banks delivering rate policy decisions throughout the week.?
Last week, the?Dow Jones Industrial Average?fell slightly and was down for a third straight week, while the?S&P 500?and the tech-heavy?Nasdaq?fell for a second consecutive week, dipping 0.1% and 0.7%, respectively.?
What can Data Do for Your Money?
Data Driven Portfolio Management & Financial Planning
领英推è
Looking Ahead
Investors continue to focus on the future path of?monetary policy. This week's commentary and projections from the Federal Reserve will be critical.?
The last time the?"dot-plot"?was published in December, monetary policymakers forecasted rates dropping to 4.6% by the end of 2024 and 3.6% by the end of 2025, equating to three 25 basis point (bps) cuts this year and four next year. The?Fed funds rate?range is currently 5.25%-5.50%.
It’s worth noting that traders of overnight index swaps dropped the probability of the Federal Reserve cutting rates by 25 bps at its June meeting to below 50%. ?
In our view, trading action still points towards?exuberance, but the loss of altitude in stock prices leading into Monday's close showed that monetary policy is still a big concern.?
The Fed is in a difficult position regarding the future path of monetary policy. By our assessment, policymakers will continue to have to deal with a?"no landing"?scenario for the U.S. economy, where the economy will stay relatively strong with elevated inflation, as recent data has shown.?
We remain?positive?on markets in the long term and have not ruled out the possibility of a?market correction?in the near term. In the short term, we have felt compelled to?hedge?certain market sectors that have seen a rise in speculative activity in our model portfolio.?
Stay tuned and be alert!
?? Last Week’s Chart
Source: Wells Fargo Investment Institute, “Looking Ahead,†March 15, 2024.
OUR FIRM
MCF Capital Management, LLC is an independent, family-run, financial advisory firm that manages investment portfolios for individuals and businesses through Quantitative Market Data Analysis.
THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?
???SOURCES:?LSEG Workspace, Dow Jones NewsPlus, MarketWatch, Wall Street Journal, Barron’s, FinancialJuice, Investing .com, CNBC, Reuters, Wells Fargo Investment Institute, TradingView, Zacks