June’s Federal Open Market Committee meeting will conclude tomorrow likely with no action taken by the Fed. With interest rates already near zero and Chairman Jerome Powell stating negative rates are not an option, there is little that can be done. Instead, investors will look for discussion over potential stimulus packages and economic projections.
Part of the Federal Reserve’s role is to project GDP, unemployment, etc. to help the public anticipate what may be ahead for markets and the overall economy. Although the Fed is focused on the economy and not the market, markets tend to react to these economic announcements.
This will likely not be a groundbreaking meeting unless a stimulus package is announced. Given the record employment figure last week, it is unlikely the Fed will rush into any policy which could prove unnecessary. Had the report shown a large loss of jobs instead of again, the Fed might have proposed more options to stimulate the economy.
What we have now is an economy in limbo. Jobs look to be coming back as businesses reopen albeit with an increase in new Covid-19 cases. One can expect this to be a wait-and-see meeting as the Fed projects what could lie ahead for the US economy. Should the economy trace those projections, the additional stimulus may be necessary for the coming months.
As always, traders should be prepared for any possible outcome – evidenced by the jobs report last Friday. Stop orders can help to reduce risk, but traders must be active in their monitoring of open positions.
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