Buy the S&P because the Fed’s hawkishness is already baked in

Buy the S&P because the Fed’s hawkishness is already baked in
September 20 14:06 2016 Print This Article

It’s Super Wednesday eve, and not a trader is stirring — at least in the early going.

Sure, oil is losing altitude, but stock gauges worldwide aren’t making huge moves. Everyone seems to be waiting for the Federal Reserve and Bank of Japan’s big policy announcements tomorrow.

The central-bank double-header is being called “Super Wednesday,” like it or not. There is buzz about how markets already have done the Fed’s work and about how the BOJ could steal Yellen & Co.’s thunder.

You’ve also got folks predicting the yen USDJPY, -0.23%  will weaken, as well as forecasts for muted action overall until tomorrow. Jeff Gundlach expects ahawkish Fed tone but no rate rise, and economists are refusing to rule out a surprise hike.

The Fed becoming less loosey-goosey is already baked into markets quite a bit, and that’s one reason why it’s time to jump into U.S. stocks, according to our call of the day. More below on that, from the Kobeissi Letter.

Meanwhile, today’s chart suggests it’s too soon to start going to cash in a big way.

S&P futures ESZ6, +0.40%  and Dow YMZ6, +0.44%  are up modestly, even as oilCLV6, -0.67%  pulls back. Europe SXXP, +0.19% is moderately higher, while Asia closed little changed. Gold GCZ6, -0.07% and ICE’s dollar index DXY, +0.08% aren’t doing much.

A lot of Fed hawkishness has been priced into the markets, and it’s not warranted, according to Adam Kobeissi and his team.

On top of that, they point out the slumping S&P 500 SPX, +0.50%  has found support several times at a key chart area — between 2,110 and 2,130. Therefore, “buying the market at this point is a good idea,” the latest Kobeissi Letter reads.

“We have increased long exposure and still believe 2,200 on the S&P is a potential by year end,” they say in their missive.

“It is important to note that volatility will increase, especially with WTI crude oil prices below $45/barrel,” they add. “For this reason, we encourage our subscribers to watch the 2,110 level on the S&P 500. If the market does manage to break below this level, we believe long positions should be reduced.”

view more articles

About Article Author

Mark Winterberg
Mark Winterberg

View More Articles