Fed: No Changes

The Fed made no changes to either its interest rate target or debt purchase programs.

No mention was given to potential future rate hikes or a change in the ongoing policy. This was met with some initial criticism, as can be seen by the reversal in stock prices following the announcement.

I think the Fed was correct not to discuss any potential hikes. Mortgage rates have started to rise, and though existing home sales have improved for 2 consecutive months, new home sales have been essentially flat since February. Furthermore, both foreclosures and credit card defaults will likely continue to rise throughout the end of the year.

Regarding the economic backdrop, the relative improvement was clearly stated. The Fed painted an accurate picture, describing the ongoing weakness but acknowledging that the rate of deterioration is slowing.

We are gradually moving towards what should become a period of slow growth. As such, investors may want to shift towards companies that could benefit from a rebound. These include Baker-Hughes (BHI - Analyst Report) and Weatherford (WFT - Analyst Report).

At the same time, I would maintain exposure to companies like AutoZone (AZO - Analyst Report) that benefit from the cautious high unemployment environment. This is important, since the recovery will not feel like a recovery to many people.