Today I posted my two-hundred-and-fourteenth YouTube video: Waiting for the Fed
Today’s topic: Waiting for The Fed. We are about a week out from the Fed’s December 14 meeting, where another 50 basis point increase is expected. We’re now in the Fed’s quiet period, but last week Fed presidents were adamantly setting expectations for 50 basis points. A 50 basis point increase would be a step down from the previous 75 basis points, and many would see that as a sign that the Fed is tapering. However, the main thing to look at on December 14 is the Dot Plot of projections from the Fed itself. That will tell investors and traders how much longer the Fed now expects these raises to continue, and how where the peak might be in rates for this cycle. Wall Street is currently predicting a peak 5% benchmark rate. (We’re currently at 3.75-4%.) But I think the top is likely closer to 6%. If the Fed settles into a projection of 5%, the market will likely relax and head into an end-of-year rally that might end in the beginning to mid-January. If the Fed gives any impression that it’s looking looks at something closer to 5.5 to 6%, that would be enough to scare the market and lead Wall Street to lower projections of market gains for 2023. Right now the S&P 500 continues to teeter on the edge of resistance near the 4,000 ceiling set by previous highs of 4110 in September and 4080 at the end of November. If the Fed doesn’t come out with jarring news on the 14th, I think we can look for the index to break through 4000 until it heads back down in January 2023.
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