Broadly speaking, market observers expect that stocks have priced in how the central bank may proceed with interest rates.
Wednesday is set to be a big day for investors with fresh inflation data in the morning and a new summary of economic projections from the Federal Reserve in the afternoon. But as far as Wall Street is concerned, the Fed event, at least, could largely be a snooze. Broadly speaking, market observers expect that investors have already priced in how the Fed may proceed with interest rates.
So long as this week's Fed meeting sticks to the consensus view, many observers expect stocks will breathe a sigh of relief. The S&P 500 has continued to hit new highs, most recently on Monday, shrugging off any signs of economic weakness or sticky inflation. It's higher by more than 12% in 2024. Meanwhile, a move to a more hawkish stance by Fed ChairJerome Powell at his press conference Wednesday after the meeting wraps up could also put stocks in a tailspin. Powell will have to explain how the central bank plans to proceed in its campaign against inflation as some recent labor data shows signs of weakening.
"I'd be surprised if the Fed's going to message anything that's so shocking that it's going to send the markets more than 2% in either direction," Nick said. In particular, these observers worry that large-cap tech stocks may be vulnerable after their recent outperformance, and say better opportunities may be found in the broader market. Nvidia, for example, last week rose above $3 trillion in market value for the first time.
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