The Federal Reserve Chairman Jerome Powell is set to testify in front of the House Financial Services Committee Wednesday, and there are three things in particular investors should look out for.
Rate Cut Indications
During the hearing, investors should listen closely to any words Powell uses that may indicate the reserve bank is serious about cutting interest rates. The S&P 500 is up 2.74% in the past month, during which time the 10 year treasury yield has fallen aggressively to 2.06%, as investors hope for an interest rate cut to stimulate what has been a weakening economy. GDP growth has fallen from roughly 4% in August of 2018 to projections of below 2%, with inflation remaining stubborn at around 2%. Listen for whether Powell is serious about delivering the July rate cut many hope for.
The last thing investors want to hear from Powell is the word 'patience.' That word would indicate the Fed has a lot more data gathering to do before cutting rates. Most market participants think now is the time and that we've seen enough negative data. Listen out for any other words or phrases that would indicate either a move closer to a cut or hesitance.
Stocks could easily gain if Powell suggests a rate cut. The S&P 500 is down 0.37% in the past five days, as investors have become fearful the Fed won't slash rates. The unemployment data out Friday beat expectations, making investors wary the Fed will keep rate steady.