The Upcoming Federal Reserve Meeting: What Investors Should Look Out For

The Federal Reserve meeting is about to make a crucial decision on interest rates after the release of the Consumer Price Index (CPI) announcement. With the expectation that no rates will be raised, investors should pay attention to the Federal Open Market Committee (FOMC) dissents as they may signal changes in policy, which could have significant effects on the market. In this article, we’ll discuss the key points that investors should watch out for, including Jerome Powell’s tone towards sufficiently restrictive and the potential shift in his tone since last year. We’ll also explore the three potential trades discussed in a recent video update that investors should consider.

Powell’s Hawkish Skip: What to Expect?

Experts predict that Powell will talk about the hawkish skip, where the FOMC ends their streak of raising interest rates for 15 or 10 months but communicates that they are serious and may still increase rates in the future. It’s crucial to watch Powell’s tone regarding this skip and his stance on sufficiently restrictive policies, which could affect the FED’s overall outlook. Investors should pay attention to his response to questions on Canada and Australia and his explanation of long and variable lags, which can help indicate the FED’s future monetary policy.

The Summary of Economic Projections (SCP)

Besides Powell, investors should also look at the projections of the Summary of Economic Projections (SCP) as they can indicate the FED’s future course of action. According to SCP, the terminal rates for 2023 are expected to go up but not exceed 5.3 percent as it could be bearish. Additionally, the unemployment rate is expected to decrease, and GDP may be revised upwards. These projections can help investors make informed decisions about their portfolios.

Possible Trades to Consider

Let’s now move on to the three potential trades identified in the video update. Firstly, investors should consider the 2-year Bond trade, which could either go up or down depending on market circumstances. Experts predict a possible pause in the market, and a potential breakout in bond yields. It’s recommended to go long on the two-year bond to hedge your portfolio. Secondly, there is an excellent trade opportunity with MPW, a stock that goes ex-dividend tomorrow. It’s advised to sell the MPW trade shares tomorrow, secure a profit and remain an owner of MPW so that you can be compensated through the dividend. Finally, there is a “random” play recommendation on Overstock, based on the news that they are the stalking horse bidder for Bed Bath and Beyond assets. The speaker recommends flipping the stock, which could be a profitable and exciting opportunity in the short term.

Conclusion

With the upcoming Federal Reserve meeting, it’s crucial to be ready for any potential volatility in the market. It is advised to sell out of the 3M and NVIDIA trades, which may be impacted negatively, and explore new opportunities with an open mind to uncover potential trades. Investors should watch Powell’s tone towards sufficiently restrictive policies and dissents within the FOMC to get an idea of the FED’s future course of action. By keeping these key points in mind, investors can make informed decisions and navigate the markets with ease.