Here are three things stock investors should watch for when the Federal Reserve announces its latest interest rate policy on Wednesday.
- Any deviance the Federal Reserve takes from its currently dovish path would pressure stocks. "Markets this year are anticipating a return to earnings growth, a Fed on hold and the resolution of the trade dispute with China, but if any of these things fail to materialize then we are going to see a quick reversal of the gains," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. "At this point in the cycle, it still makes sense to be cautious."
- The market has priced in a 0% chance of interest rate hikes and a 21% chance of a rate cut.
- A rate cut would increase the value of many current bond holdings, which defensive investors should keep in mind.
Why Stock Investors Should Care About Yield Curve Inversion
The spread between the 10-year and 2-year treasury yields is narrowing. The 10-year now yields 2.61% vs. the 2-year's 2.467%. This means bond investors have bid up the price of longer-dated bonds (yields fall as prices rise). Demand for long-dated treasuries is an indication many believe the economy is headed for a recession fairly soon. What does this mean for stocks? Nothing rosy.
Taking Stock of Tilray's Quarter
Tilray (TLRY) , RealMoney's stock of the day, reported a wider than expected loss, but revenue growth of 204% year-over-year. The stock rose initially, before falling more than 2% to $70.18 a share. But Kevin Curran of RealMoney says Tilray's partnerships with the likes of AB InBev (BUD) and Novartis (NVS - Get Report) helped obscure its lack of profitability, while rivals Canopy Growth (CGC - Get Report) , which is backed by Constellation Brands (STZ - Get Report) , and Cronos (CRON - Get Report) , which is backed by Altria (MO - Get Report) , have much larger partnership deals in place.
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