The only new information released after the two-day Fed meeting that concluded yesterday was that the Fed intends to raise rates twice before the end of the year. While most economists expect the Fed’s first rate hike to come in September, the Fed statement revealed no specific guidance on the timing of either of the two raises to come in 2015.
Stocks have reacted favorably to the lack of specific news, showing that investors are likely encouraged by the Fed’s lack of action at this meeting and lack of specific language about future raises. This lack of guidance likely means the Fed will not raise at the July meeting, and there is no August meeting, making September a virtual lock for the first raise.
It will be interesting to see how investors react to the pending rate increase as we push deeper into summer. As the September meeting date approaches, it will be difficult for investors not to get at least a little concerned about the likelihood of a significant correction.
Greece looms large over global financial markets as well. Should the “Grexit” occur – Greece exiting the Eurozone – that shock could serve as the trigger, giving U.S. investors a valid excuse to sell.
There should be a compression of data, events, and Fed action as we near the end of summer, combining to pressure markets. I would expect the market to begin to show signs of strain as we head toward this confluence of issues. It will certainly be interesting to see if the market can withstand the pressure and continue the bull market trend that is very, very long in the tooth at this stage – more than 6 years since the March 2009 stock market bottom was set.