Market Commentary

» Posted by on Jun 19, 2019 in Announcements, Shop Talk, Uncategorized | 0 comments

Traders are keeping a close eye on the Middle East. Iran released a statement that it would go above the agreed upon cap on its stockpile of enriched uranium in the next 10 days, which means they will breach the limits of the 2015 Nuclear Pact. The U.S. followed by saying it would send an additional +1,000 troops to the Middle East in response to “hostile behavior”. Keep in mind, we already have more than 20,000 U.S. troops in Afghanistan, Iraq and Syria, and last month the Pentagon deployed an aircraft carrier, a few warships, bombers and additional forces to counter what officials are saying is a growing threat from Iran. U.S. military officials said the additional troops will help provide security and intelligence in the region amid heightened tensions over a series of attacks on oil tankers in the Gulf of Oman.

Slice the headlines however you like, tension in the Middle East are clearly escalating. Here at home, traders are keeping a close eye on the Fed’s two-day FOMC meeting. There will be an announcement by the Fed today at around 1:00pm CST, followed by a press conference with Fed Chair Jerome Powell. Most inside the trade are thinking the Fed will keep rates “unchanged”. The odds seems to be about 80% thinking “unchanged” and about 15% to 20% thinking a slight rate cut. I am of the belief the Fed still wants to see more data and will pause. I’m also thinking the Fed wants to really see if we can gain any traction with the Chinese in regards to the current trade disputes. Meaning they are wanting to see if anything can come form the upcoming G20 meeting scheduled for the end of the month in Japan. Perhaps President Trump and Chinese leader Xi can take steps in the right direction? If no headway is made in regards to trade with the Chinese, there are some who believe the Fed could cut rates two or perhaps three times in 2019.

The Chinese central bank has been adding stimulus and trying to help the Chinese leaders during this process, so I suspect members of the Fed are felling some type of similar duty of responsibility. There are some sources who are starting to think the Fed could hold off until the September meeting, and rather than making a standard quarter point cut, they make a more aggressive half point cut in rates. Then perhaps follow up with another cut in the October or December meeting, depending on how trade negotiations play-out.

Looking ahead, many insiders are saying the stock market is entering its two most important weeks of the year. We have the Fed’s meeting this week, followed next week by the OPEC meeting and the highly anticipated G20 summit. Remember, the three most popular stock market headlines this year have revolved around Fed policy, Chinese trade, and tensions in the Middle East. All three will be in play these next two weeks so stay buckled in.

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