The Federal Reserve is going to meet this afternoon and release an FOMC edict. They will make no change in interest rates or reduce their bond buying operations today. In fact, I went and took a look at the Fed fund futures, which project interest rates through the end of this year and they see no change in rates coming.
Despite that, people are speculating that the Fed could sound the alarm on inflation, even though various Fed officials over the past few weeks have said they are not alarmed about it at all. With nothing really important happening at the moment, market commentators and TV news talking heads in the financial media need something to talk about this week and so today’s Fed meeting is it. So far, all of the Fed officials have been projecting the first rate increase to occur in 2023. There is speculation among some that one or two of the officials may move that prediction up to the second half of next year. I don’t think such a move would mean much if it does happen.
Financial markets as a whole are basically drifting. As I wrote on Monday overall stock market volatility is shrinking now and is likely to continue to do so this summer.
The most bullish market this week has been energy and oil, which made a new 52-week high yesterday.
Take a look at the chart of XOM, which I own to give you an example of what is happening with oil stocks now.
Notice how the relative strength plot for XOM comparing it to the price action of the S&P 500 is now trending up and has been doing so since November. To beat the market you want to be in the things beating the market and energy stocks are doing it.
It’s tough to buy something going up this strong and really in a bull run like this, having already doubled, it’s best to take positions on pauses and pullbacks.
That is something we are getting now in gold and mining stocks. I talked about that and more with Jim Goddard of howestreet.com in this interview.
Let’s see how today shakes out.
-Mike
