Date: January 27, 2016

Will the Doves Assume Control of the Fed Today?

It doesn’t even feel like the world has recovered from the hangover left by Janet Yellen and the Fed after their ill-fated and poorly timed December interest rate hike, but now, it’s FOMC announcement day again. However, unlike December when a rate increase was widely expected, the Fed is not going to take any action today.

The Fed’s post-announcement commentary is what everyone will sink their teeth into for clues of future rate hikes or the committee’s possible move back to the dovish side. With stocks correcting sharply in January along with the global economic uncertainty, it’s very hard to believe that the hawks will win out today in any way, shape or form. Given the Fed’s hints at four interest rate increases in 2016 and the markets only pricing in one or two rate hikes, it will be interesting to see how that gap is bridged.

As with previous announcement days, the model for today is plus or minus 0.50% for the S&P 500 until 2pm before a few sharp moves are made and then a rally into the close. That’s the historical trend 75% of the time.

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Paul Schatz, President, Heritage Capital

Paul Schatz, President, Heritage Capital