NO CLEAR INDICATIONS REGARDING THE NEXT MONETARY POLICY MOVE

Monetary policy makers gave no clear signal that their next move would be a hike or a cut, or that any adjustment should be expected at their next meeting in June. Officials slightly upgraded their assessment of the economy saying “economic activity rose at solid rate while the labor market remained strong.”

The Committee further stated inflation is below targeted level and even though wages are rising at the greatest pace of this expansion “remain vexingly low in current conditions.”

Equities fell following the statement as it dampened market expectations that the next case would be lower.

A long time adage is the markets hate uncertainty. The FRB Chair’s sentiment of no clear signal regarding the direction of monetary policy is extremely opaque. In view for years equities have been spooned fed by the FOMC and this new narrative has radically changed the environment.

What will be the ramifications?

I think the Committee has just resurrected the need for macroeconomic and geopolitical analysts, people that can develop a thesis for investing decisions. It may be the first challenge to the passive model that has dominated the financial markets for many years.

Twenty years ago the mantra was “prudent portfolio” or a portfolio crafted upon possible expectations. Ten years ago it started a transition to “prudent investment” or mono variable emphasizing cost and passivity, a mantra that today is all to dominating.

What will happen today? Will all delay any decisions until tomorrow’s employment report?

Last night the foreign markets were mixed. London was down 0.13%, Paris down 0.52% and Frankfurt up 0.03% China was up 0.52%, Japan was closed for a holiday and Hang Sang up 0.83%.

The Dow should open mixed as attention is now focused upon earnings, trade and tomorrow’s jobs data. The 10-year is off 5/32 to yield 2.53%.

kent
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.