S&P 500 Outlook: Index Sentiment, Financials Await Fed Choice

S&P 500 Outlook Speaking Factors:

S&P 500 Outlook: Index Sentiment, Financials Await Fed Charge Choice

Wednesday will see the announcement of the Federal Open Market Committee’s price determination. Whereas the coverage assembly may be very unlikely to lead to an altered price forecast, a recovering fairness market and sturdy financial information might see some officers strike a extra hawkish tone than in months prior. The panorama might drive Chairman Powell to stroll the road between tempering dovish expectations and dinging fairness sentiment with a hawkish tone.

CME FedWatch Device – Curiosity Charge Chances

S&P 500 Outlook: Index Sentiment, Financials Await Fed Decision

Supply: CME

With the S&P 500’s latest break by means of four-month vary resistance, the extent ought to now act as assist. Thus, a key stage to look at within the occasion of a poor response might be 2,815. Subsequent assist is much less express however would doubtless exist close to the underside of the latest resistance band close to 2,785. The Dow Jones finds itself in a much less advantageous place however enjoys the good thing about a golden cross. Nonetheless, given the elemental implications of Wednesday’s FOMC determination, a shock shift in coverage might render technical ranges out of date.

S&P 500 Worth Chart: Every day Time Body (September 2018 – March 2019) (Chart 1)

S&P 500 price chart

Be taught the variations between the Dow Jones and the S&P 500

The doubtless drastic implications from a shift in coverage might additionally shake-up sector efficiency. Whereas high-growth sectors comparable to tech and semiconductors might fall below stress within the occasion of extra hawkish tone, extra defensive industries might even see comparatively decrease volatility as buyers search their relative security. That mentioned, utilities and healthcare have witnessed substantial demand in latest weeks with the previous firmly in overbought territory.

Dow Jones Worth Chart: Every day Time Body (January 2018 – March 2019) (Chart 2)

dow jones price chart and xlf etf

Dow Jones worth chart overlaid with ratio of SPX to XLF in crimson

However, financials might discover themselves in a novel place, having fun with some advantages from hawkish coverage (owing to the connection between income and market charges) and using the wave of broader fairness sentiment within the eventuality of a dovish continuation. The XLF trade traded fund – a fund that gives publicity to US monetary shares – has underperformed the S&P 500 within the final yr, with explicit weak spot from early December 2018 when the dovish tone was first struck.

View our Financial Calendar for large occasions scheduled within the week forward.

Within the situation the place Chairman Powell suggests price hikes might return to the desk prior to anticipated, XLF and the monetary sector might even see elevated volatility and maybe a return to parity. In any occasion, the financial coverage assembly is prone to spur worth motion throughout a litany of asset courses. For dwell protection of the speed determination, be a part of John Kicklighter on Wednesday at 1:45 EST.

–Written by Peter Hanks, Junior Analyst for

Contact and observe Peter on Twitter @PeterHanksFX

Learn extra: Dow Jones, S&P 500, FTSE 100 and DAX 30 Elementary Forecast

DailyFX forecasts on a wide range of currencies such because the US Greenback or the Euro can be found from the DailyFX Buying and selling Guides web page. In case you’re seeking to enhance your buying and selling method, take a look at Traits of Profitable Merchants. And should you’re in search of an introductory primer to Forex, take a look at our New to FX Information.

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