The following was sent to Trifecta Stocks subscribers at 11:25 a.m. ET today. Click here to learn about this dynamic portfolio and market information service.
Stocks continued to inch higher over the last several days ahead of today's Fed policy meeting. That has occurred even though we've seen GDP expectations for the current quarter revised lower by economists, regional Fed banks and even companies like FedEx (FDX) , which sees GDP hitting all of 2.2% this year. We should continue to see the Fed taking yet another pass on boosting interest rates later today, and given the hurricanes' impact, our view is the next potential interest rate hike could be late this year, but more likely in the first quarter of 2018.
The more closely watched item in the Fed's comments will be timing for its balance-sheet unwinding, and that means parsing out the Fed-speak this afternoon. Much like interest rates, we suspect the Fed will take a pass this month and revisit the strength of the economy at its October/November meeting, but more on that once we have parsed the Fed's latest words.
Keeping the market somewhat in check yesterday was President Trump's address to the United Nations General Assembly, in which he said he will take a hard line, vowing to "totally destroy" North Korea if it threatened the United States or its allies. Nothing keeps uncertainty alive lately like political drama in D.C., which also now includes questions over the potential benefits to the domestic economy with corporate tax reform at a time when the federal budget deficit continues to climb. Let's also remember we are on the cusp of the 2017 election season, and even as President Trump reaches across the aisle, odds are it won't be an all "cookies and warm milk" as politicians vie for their jobs. For this reason, we see tax reform more likely toward the end of 2017, which happens to be when the debt-ceiling conversation will be resumed.
Before we get to that, we'll first have to close the books on the third quarter and face quarterly earnings and before too long the year-end holidays. Last night, we had earnings reports from FedEx, Bed Bath & Beyond (BBBY) and Adobe Systems (ADBE) , and this morning all three stocks are trending lower. We point this out because it is another example of good news, like Adobe's earnings beat, being ill received on Wall Street -- another reason to think the next few weeks will continue to be volatile.
In recent weeks, we've exited positions as technical concerns have arisen, and that has boosted our cash position in the short term. That boost will help cushion earnings-season volatility, but that said, we're also looking to opportunistically add to the portfolio in the coming days and weeks.