Dow Jones, Nasdaq 100, S&P 500 Price Outlook:
- After leaving the Federal Funds Rate unchanged, Chairman Powell offered a series of dovish remarks
- The projected policy path looks accommodative for further gains in equity markets should sentiment stay intact
- Therefore, bulls may look to drive the Dow Jones, Nasdaq 100 and S&P 500 even higher
Dow Jones, Nasdaq 100, S&P 500 Forecasts Following June Fed Meeting
The Federal Open Market Committee announced it would leave the Federal Funds Rate unchanged at 0.0 percent to 0.25 percent at its June 10 meeting, aligning with market expectations. Subsequent remarks from Chairman Powell, however, struck a slightly more dovish tone than I suspect most market participants were expecting, and the surprise could translate to further gains for the Dow Jones, Nasdaq 100 and S&P 500 down the line.
Nasdaq 100 Price Chart: 4 – Hour Time Frame (January – June)
Earlier this week the Nasdaq 100 registered a fresh record high as it broke above 10,000 for the first time in history, a feat many attributed to the accommodative policy from the Federal Reserve. To be sure, Chairman Powell’s remarks would suggest balance sheet expansion and low interest rates are here to stay, at least until the economy returns nearer pre-covid levels.
Massive unemployment, economic uncertainty and stubbornly subdued inflation are all reasons the Fed evidenced for opting into sustaining “easier” monetary policy, and that continuation may spillover into the three major US indices. As I noted in my webinar, the technical outlook for each of the indices looks encouraging and the comments from Chairman Powell have undoubtedly eased concerns on the fundamental side – in the short and medium terms at least – as longer-term concerns will remain a topic of discussion.
While the current monetary policy regime may create problems down the line, it seems the market is content to accept the risks as long as sentiment remains intact. To that end, Chairman Powell conceded the central bank and its officials are not in the business of tracking or forecasting accurate stock prices, so it is up to the market to decide where the true value resides.
Since the market has been willing to bid stocks higher at every turn up to this point, I see little reason bullish appetite will change overnight unless there is a degree of “buy the rumor, sell the news” or yet another unexpected threat to economic activity occurs. Elsewhere, recent price trends like US Dollar weakness and gold strength may also persist as the market begins to accept a longer than expected period of monetary accommodation.
At the end of the day, the mantra “don’t fight the Fed” exists for a reason, and it seems the central bank has played a winning hand up to this stage, so attempting to call their bluff at every turn may prove costly. In the meantime, follow @PeterHanksFX on Twitter for updates.
--Written by Peter Hanks, Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
