The U.S. earnings season is almost upon us and this data will likely move markets more so than usual
My dilemma is what the Fed will do regarding interest rates in either of these ‘what if scenario’s…‘
And the dilemma is…
- First – What if we see weaker than expected growth from the earning season reports. Will this offset a Fed rate cut?
- Second – Will the Fed follow through with a rate cut if the data is weak?
- Third – Recent strong job data has investors worried that the Fed may not cut rates at all.
- Fourth – The Fed will cut the interest rate but by less than the market would like. Is a cut expected?
- Fifth – Is it time to sell stocks if company data is weak?
- Sixth – A rate cut will just happen as the Fed calculates the economy is heading to the slow lane.
Stock market highs
Stock markets are high at the moment and the expectation of a Fed rate cut is very much already ‘built in’. Disappointment from either of these scenarios may lead to a stock market reversal at some level.
Doesn’t historical data demonstrate that when interest rates are cut because growth is weak, it is the weakness that matters for stocks in the end and not the low rate?
The other fear is that the stock markets are due a ‘pull back’ anyway, and this will be the main catalyst for that fall. Investors are also waiting for details of the U.S. and China trade war outcome too…?
All the gear and no idea
I’m just working through the possibilities – I, like everyone else out there, have no real idea of what the Fed will do. So don’t guess – trade what actually happens! But it is interesting to do some analysis from time to time.
Is it out of the question for the Fed to skip a July rate cut entirely? A quarter point reduction is a more likely outcome. Todays speech by chairman Powell will probably be used to manage future rate cut expectations. Speech scheduled today 9th July 2019 at: 13:45 (BST)
The Fed meet July 30th & 31st