Record Highs!
US SP500 Stock Index hits all time historic high!
The Catalyst:
Optimism for US – China Trade Deal;
Prospects for Lower US Interest Rate;
SP500 Breaks above multi-month trading range!
Could this be a signal for higher stock market prices?
US Interest Rate Decision - Tomorrow
Wednesday October 30th 18:00 GMT
85% of 40 economist surveyed by Bloomberg said they expect the US Federal Reserve to cut Interest Rates by 0.25%.
This would put the target range for the US Fed’s benchmark interest rate at 1.5% - 1.75%.
The US Fed has already cut interest rates 2x this year.
- US unemployment remains low.
- US Consumer spending remains solid.
- US Inflation remains below Fed target.
- The risk of ongoing trade war tensions between US – China create uncertainty in the background.
Bottom line: Since the US Federal Reserve has failed for over 8 years to increase inflation towards its 2% target, and the fact that the ongoing trade war uncertainty between the US and China adds downside risks to global economic growth, the US Fed, could be comfortable with risking higher inflation by continuing to cut interest rates, as a trade off method to stimulate the consumer to keep spending to support economic activity and a booming stock market.
How does the US lower interest rate policy affect investors?
Potential for stock market indices such as the Dow Jones 30, NASDAQ 100 to follow the SP500 and break above their historic highs.
Potential for higher commodities prices.
Potential for increased US inflation which may increase demand for precious metals such as Gold and Silver.
Source: FXGM Investment Research Department / Bloomberg