The Federal Open Market Committee will release its interest rate decision and policy statement at 2 p.m. ET today. That will be followed by a press conference with Fed Chair, Jerome Powell.
Typically, the Fed interest rate decision provides a catalyst for market movement. Billions of dollars of trades will be triggered the second the news is released as computer algorithms go to work and there will be billions more of stock traded as slow moving humans try to catch a move as well.
The most important thing to know about the reaction to the FOMC decision is that it doesn't much matter if the news is meaningful or not. The market is going to move on the Fed simply because it is a triggering event. Traders sometimes make the mistake of thinking that just because what the Fed didn't isn't significant or surprising then it won't create much market movement.
The circumstances for the Fed decision today are unusual. Normally there is nothing more important than what the Fed has to say, but in the current environment, the Fed decision is outweighed by the upcoming decision regarding tariffs. The market has been anticipating a decision on trade for years now and whether or not tariff increases are delayed or not is the only short-term catalyst that really matters.
Currently, the market is quite content with the Fed even if there are no interest rate cuts likely to occur soon. There is a Goldilocks atmosphere with better-than-expected economic growth, no signs of inflation and a Fed that is willing to step up and take action at the first sign of weakness. The recent "not-QE" policy by the Fed has helped to provide another flood of liquidity that has been the main driver for the indices since early October.
There will be a reaction to the Fed decision today because that is the job of computer algorithms but it won't last long and will likely be limited and random. The focus will turn back to the tariff issue, which will likely remain unresolved until the deadline on December 15.
While the indices aren't doing much at all, this is a very tough trading environment while we wait. Any trade at this point is basically a bet on what will happen with tariffs. Fundamentals and technicals are going to provide us with much of an edge.
The technical action suggests that the market is anticipating positive news on tariffs, but the prudent approach is to wait for the news before taking action. The Fed should provide some added volatility today, but the decision is not likely to have any lasting impact.
We have a flat open on the way. Stay patient.