Fed Statement Brings Stocks Back to Earth

As some fatigue sets in at the end of a long trading week, lots of fingers are pointed at the Fed which held interest rates steady this week and stayed on course to move rates higher in the months ahead.

“Just as the feel-good factor was beginning to return to the markets, buoyed by the result of the U.S. midterms, the Fed swooped in and brought everyone back down to earth,” said Craig Erlam, senior market analyst at OANDA.

There’s been plenty of grumbling over the central bank’s unwillingness to budge on that hawkish stance. Wolf Richter of the Wolf Street blog has had enough of the Wall Street “crybabies” who think the Fed is going to mess everything up. “And yes, it might get ‘quite ugly’ for asset holders because asset prices are heading south, after a decade of Fed-engineered ‘wealth effect.’ That’s the fear, and that’s why the crybabies on Wall Street are making such a racket,” he writes.

It’s not just the Fed that’s bothering folks. Slumping oil prices and signs of trouble in China can be added to the list. But our call of the day has one more niggling issue to add to the mix — midterms.

“We expect a focus on infrastructure and healthcare costs, but one issue may be that S&P 500 returns have been the lowest, on average, with a Republican president and split Congress,” Stifel head of institutional equity strategy Barry Bannister told clients in a recent note.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza