Investors are anxious about the possibility that the results of this week’s US presidential election will take days, or even weeks, to be known. However, Tuesday’s vote No It is the only major event that could move the market.
In fact, it is quite likely that the chairman of the Federal Reserve, Jerome Powell will steal the spotlight when he takes the podium Thursday for his post-meeting news conference.
In some ways, the November Fed meeting could prove somewhat anticlimactic, especially compared to the drama that preceded the Fed’s massive interest rate cut in September. Traders consider a 25 basis point reduction in the Fed’s policy rate target a virtual certainty for Thursday, according to CME Group data.
Few expect Powell to articulate significant changes to the central bank’s plans to tighten monetary policy. The central bank is not expected to release new economic projections until December, and any discussion of other policy priorities, such as adjusting the pace of Fed balance sheet reduction, would likely be revealed only in meeting minutes, which are not disclosed. They will not publish until a few weeks later, according to JP Morgan’s chief US economist, Michael Feroli.
But by simply doing what is expected, the Fed could send a reassuring message to investors: Despite a recent rise in Treasury yields, interest rates are expected to continue falling, even if the pace of that decline remains uncertain.
How the Federal Reserve will act
Aside from the typical platitudes about being data-dependent, Powell is unlikely to offer commitments, or even hints, about how quickly the central bank might move to cut rates from now on, he said. Although you will almost certainly be asked about the election, or how the rise in Treasury yields might influence your thinking.
Control in Washington could influence the Fed’s thinking. Regardless of who emerges victorious in Washington on Tuesday, the Fed is likely to continue cutting rates. However, the outcome of next week’s election could influence how much and how quickly the central bank decides to reduce funding costs in the future, according to Ed Mills, managing director and Washington policy analyst at Raymond James.
A divided government would be the most direct result, allowing the central bank to continue cutting rates just as it would have otherwise. Where things would start to get complicated would be if either party ends up with unified control of both Congress and the White House.
In the unlikely scenario that Democrats secure control of the White House, the House of Representatives and the Senate, the Fed would have to anticipate the economic impact of policies such as corporate tax increases. A Republican victory would present even greater challenges, and another Trump term could also incentivize the Fed to act more slowly, even if Republicans cannot secure unified control of Congress.
Stock investors appear to be on edge ahead of the election. The S&P 500 fell for the second consecutive week on Friday, despite ending slightly higher on the day. The index closed 23.35 points higher, or 0.4%, at 5,728.80. The Dow Jones Industrial Average rose 288.73 points, or 0.7%, to finish at 42,052.19.
The Nasdaq Composite, which posted the biggest weekly decline of the major U.S. stock indicators, rose 144.77 points, or 0.8%, on Friday, closing at 18,239.92, although it still posted a 1.5% loss for the week.
The CBOE Volatility Index, better known as VIX or Wall Street’s “fear index,” stood at 21.88, above its long-term average of around 20. A similar index for the bond market, known as The ICE BofA Move Index also hit a new high for 2024, above 132 on Friday.
Outside of the Fed and the election, next week is relatively light on market-moving news. The highlight of the US economic calendar will be the latest reading of the ISM services sector indicator. A series of corporate earnings reports are expected, including results from CVS Health Corp, Moderna Inc., Duolingo Inc. and others.
Internationally, the Standing Committee of the National People’s Congress, China’s top legislative body, will meet for five days next week. Investors will be watching to see if a broad spending package is unveiled to help boost China’s slowing economy.
Source: Ambito
I am Pierce Boyd, a driven and ambitious professional working in the news industry. I have been writing for 24 Hours Worlds for over five years, specializing in sports section coverage. During my tenure at the publication, I have built an impressive portfolio of articles that has earned me a reputation as an experienced journalist and content creator.
