What to expect in the Fed meeting?


 Tomorrow, the Fed will sum up the results of the next two-day meeting, which has already begun. Thus, the markets may be very active tomorrow. It can be recalled that after the last meeting of the Federal Reserve, the US dollar showed very strong growth against its main competitors. This means that the markets liked Jerome Powell's rhetoric, despite the fact that he did not say anything special in his speech. We have repeatedly drawn the attention of traders to the fact that one phrase about "the possible start of discussion of the quantitative stimulus program in the near future" is clearly not enough for growth by 300 points. As for the stock markets, they continue to grow, not paying attention to various "trifles". Every day, the leading indexes update their own records and, from our point of view, this indicates only one thing—the fact that the money supply continues to grow in the American economy, and all its surpluses are deposited on the stock market. Thus, for the stock market, by and large, the results of tomorrow's Fed meeting are not even too important. What difference does it make if the regulator still does not cancel the QE program, under which at least $120 billion worth of treasuries and mortgage-backed securities is bought out of the open market every month? This is the amount of money (the minimum) that enters the US economy every month. Naturally, the shares of many large companies are now growing. Investors also need to direct new cash flows somewhere. Given the fact that investing in the United States is very developed, many American citizens have started investing in the last couple of years.

Thus, the US stock market may begin to feel pressure on itself when the Fed begins to reduce the quantitative stimulus program or completely completes it, or when it begins to raise the key rate. However, according to Jerome Powell's comments and the data from the dot plot chart, the QE program will begin to be curtailed no earlier than 2022, since the labor market is still far from its pre-crisis values, and the Fed sets its main target to achieve maximum employment. The same applies to bets. According to the dot plot chart, 7 members of the Fed's monetary committee are in favor of raising the rate in 2022, and 11 are against it. Thus, at the moment, the probability of a rate increase even next year is minimal. Based on this, for another year or even two, US stock indices can continue to grow calmly, without paying attention to macroeconomic statistics or statements by representatives of the Fed. It's simple: there is more money in the economy, the Fed does not interfere, rates remain ultra-low, and stock indexes are growing. Thus, we believe that there is nothing surprising in the daily update of highs by American stock indices, it is surprising that Tesla shares are not growing.