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Profit from the Pros By Kevin Matras Executive Vice President
Stocks End Higher After FOMC Minutes
Stocks closed higher yesterday with all of the indexes in the green.
They hit their session highs after the FOMC Minutes were released which confirmed the Fed's commitment to raising rates, and to begin reducing their balance sheet on June 1st.
None of this is really new news. And past minutes are not guarantees for future meetings. But in addition to showing 'all participants' agreeing to a 50 basis point hike at the last meeting, it also showed that 'most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings.'
The market cheered the news as some had worried that the Fed might pull back somewhat on their tightening after seeing how far the stock market had fallen. (The market was already getting pushed around at the time of the last meeting, and they did not waver in their commitment to combat inflation.)
The Minutes also showed the Fed acknowledging that while 'overall economic activity had edged down in the first quarter, household spending and business fixed investment had remained strong.' And that the 'first-quarter decline in real GDP was driven by categories of spending that had been volatile in the past, and they viewed the continued strength in private domestic final demand, the labor market, and industrial production as providing a more accurate picture of the economy's direction in the first quarter.'
It also noted they 'anticipated that GDP growth would rebound in the second quarter and advance at a solid pace over the remainder of the year.'
Nothing is set in stone, of course. But those acknowledgements helped take the air out of the growing recession fears narrative. And stocks responded (rallied) accordingly.
Unfortunately, the fears of recession won't entirely go away anytime soon, at least not until we see inflation start to go down some more, while the economy stays strong.
But as more investors discount the recession argument and see that it's growth that lies ahead for the economy, stocks could see a significant rebound.
And with valuations now at 2-year lows, now is the time to start getting ready for the next leg up.
On a separate note, for those looking for some interesting places to invest, consider taking another look at the metaverse players. They have gotten clobbered in this downturn. But that doesn't change the forecast for what could very well be a $10+ trillion market.
To learn all about the metaverse and which companies are on the ground floor of this burgeoning industry, be sure to read our latest commentary...
The metaverse is a quantum leap for the internet as we currently know it – and it will make some investors rich. Just like the internet, the metaverse is expected to transform how we live, work and play. Zacks has put together a new special report to help readers like you target big profits. The Metaverse – What is it? And How to Profit with These 5 Pioneering Stocks reveals specific stocks set to skyrocket as this emerging technology develops and expands.
Here are 5 stocks added to the Zacks Rank #1 (Strong Buy) List today. Read More »
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