3 Things From the Fed Stock Investors Need to Know

Credit: The Street
Published on March 19, 2019 - Duration: 02:37s

3 Things From the Fed Stock Investors Need to Know

Here are three things stock investors should watch for when the Federal Reserve announces its latest interest rate policy on Wednesday.

Any deviance the Federal Reserve takes from its currently dovish path would pressure stocks.

"Markets this year are anticipating a return to earnings growth, a Fed on hold and the resolution of the trade dispute with China, but if any of these things fail to materialize then we are going to see a quick reversal of the gains," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

"At this point in the cycle, it still makes sense to be cautious." The S&P 500 has returned just above 13% year-to-date, with the average forward earnings multiple on the index at 16.3, above the ten-year average of 14.7.

The market has priced in a 0% chance of interest rate hikes and a 21% chance of a rate cut.

A rate cut would increase the value of many current bond holdings, which defensive investors should keep in mind.

Why Stock Investors Should Care About Yield Curve Inversion The spread between the 10-year and 2-year treasury yields is narrowing.

The 10-year now yields 2.61% vs.

The 2-year's 2.467%.

This means bond investors have bid up the price of longer-dated bonds (yields fall as prices rise).

Demand for long-dated treasuries is an indication many believe the economy is headed for a recession fairly soon.

What does this mean for stocks?

Nothing rosy.

Stock investors should take note.

Taking Stock of Tilray's Quarter Tilray , RealMoney's stock of the day, reported a wider than expected loss, but revenue growth of 204% year-over-year.

The stock rose initially, before falling more than 2% to $70.18 a share.

But Kevin Curran of RealMoney says Tilray's partnerships with the likes of AB InBev and Novartis helped obscure its lack of profitability, while rivals Canopy Growth , which is backed by Constellation Brands , and Cronos , which is backed by Altria , have much larger partnership deals in place.

Related.

Kass: Tilray Is Promising but I Prefer This Other Stock in the Pot Space Related.

Canopy Growth CEO Sees Dot-Com-Like Bust for Many Weed Stocks


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