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Stocks Remain Near All-Time Highs, Focus Shifts Back To U.S.-China Trade Talks

Stocks closed mostly higher yesterday after the Fed cut rates a quarter point as expected.

This was the second rate cut this year with the last one (also a quarter point cut) taking place on July 31st.

Stocks were lower going into the announcement, then fell a bit more shortly thereafter, largely on the 'buy the rumor, sell the fact' phenomenon. (Stocks often move in anticipation of an event, then go the opposite way on the confirmation or conclusion of the event.) With this rate cut being one of the most widely expected cuts in recent memory, it was all but a certainty we'd get a 25 basis point cut.

But then stocks smartly bounced back up.

And why shouldn't they? No matter how you slice it, a rate cut is bullish for the economy and the market.

The Fed also left the door open for another rate cut in October or December.

And in the Fed's policy statement, it reiterated that they would "act as appropriate to sustain the expansion" (i.e., cut rates further), echoing the same language as they did in July.

Fed Chair Jerome Powell expanded on this sentiment at his press conference by saying "if the economy does turn down, a more extensive series of rate cuts could be warranted."

But he maintained his positive outlook for the economy, and specifically noted that "the consumer part of it, is in strong shape."

So we'll have to wait and see what the Fed has in store in the coming months.

In the meantime, the economy is strong, unemployment is near record lows, consumer confidence is near record highs, corporate earnings continue to impress, and household income is at the highest level in 20 years.

Traders will now shift their focus back to the U.S.-China trade talks set to resume in early October. And while few are expecting a full-blown trade deal, there's plenty of hope that a lessening of tensions or a 'trade-truce' can be seen. And that alone could send prices soaring.

But if/when there is an actual trade deal, that could usher in years of additional growth and prosperity, and years of additional gains in the market.

As I've said before, these are historic times for the economy, and for the market.

So make sure you're taking full advantage of it.

That means getting into the right stocks and staying out of the wrong ones.

Don't squander this time with preventable mistakes. Making money in the market is easier than you think. And the time to act is now. To learn how you can turn the probabilities of success in your favor on your very next trade, be sure you read my latest commentary...

Read This Before Your Next Trade


Kevin Matras

Executive Vice President, Zacks Investment Research


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