What FOMC decision would result in a stock market rally?
I have no idea what to expect on Wednesday. One on hand, no one was predicting rate hikes in January. However, there is now a 90% chance the Fed raises the benchmark treasury rate. Normally, we’d expect stocks to go negative, but the hike is effectively priced in and I think yields will go down or stay flat, since the Fed’s credibility won’t be in question. This might lead to a mute or positive reaction for stocks.
One the other hand, if the fed chooses not to hike, many are predicting a stock market rally. But I’d also argue that UST’s sell off more and yields rise, since the Federal government could be seen as unserious in combating inflation. And rising yields have been a real negative driver for stocks over the past month.
What will the conditions have to be for stocks to go up? Is there a condition out there?