The biggest market moving event of the week was the Federal Open Market Committee (FOMC) announcement on Wednesday June 15, 2016 from the two day FOMC meeting on June 14th & 15th, and subsequent press conference.
As expected, the FOMC left the Fed Funds Rate unchanged.
Above, I said left the Fed Funds Rate unchanged ‘as expected’, but it is interesting how quickly expectations change within the market, and more notably, within the FOMC.
On the week of May 16th, when the April FOMC minutes were released, the minutes were taken by the market as having very hawkish tone. Hawkish meaning that the FOMC was ready to hike rates at the June meeting.
Now, just a month later in June; we get no rate hike…Again.
I believe many investors give the FOMC (and other central bankers) credit for being omniscient, but in reality they are just people like you and I. Their ability to see the future, and make accurate projections is not very good. It has taken a while, but investors seem to be finally figuring this out.
Yes, Dorothy: They aren’t real wizards, and there may not be a fairy tale ending.
Exactly how this unfolds is anyone’s guess, but given the current high stock market valuations, and newly growing skepticism, the risk reward does not appear favorable.