We issued a warning yesterday regarding our expectation for the Federal Reserve to cut its economic forecasts significantly for 2013. We remain uncertain about the market’s awareness about this event, as most market chatter is about the Fed remaining supportive of stocks or whether it might see too much good in the economy and begin to speak about pulling back its supports. Some have expressed an opinion that bad news is good news, but I’m not sure that will prove true. I believe an underlying faith in an improving economy has been a key support for the market’s rally this year. Thus, it begs to question whether the pulling of that rug out from underneath of us matters or not. I believe it does, however, if economic growth of over 2% is still forecast by the Fed for the year and if it continues to express faith in recovery, it may be enough for the market. Because of the run of stocks to this point, I would hedge risk and sell those high flying stocks with valuations that are difficult to justify today, and look toward value. That is why I recently downgraded Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG), and expressed concern about the near-term action for Exxon Mobil (NYSE: XOM). However, I saw value in Cisco Systems (Nasdaq: CSCO). I do like gold and silver and their relative securities here like the SPDR Gold Shares Trust (NYSE: GLD), iShares Silver Trust (NYSE: SLV), Market Vectors Gold Miners (NYSE: GDX) and the ProShares Ultra Silver ETF (NYSE: AGQ). Stay tuned for more…
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Wednesday will be as big as a day gets for the market, with some very key information emanating from the Federal Reserve. First, at 2:00 PM ET, the Federal Open Market Committee (FOMC) will declare its current monetary policy plans. Expectations are for no change to rates and asset purchases. Also at 2:00 PM, we’ll get the latest updated Fed forecast data. The quarterly report offers insight into the Fed’s expectations for GDP, employment and inflation. We may get a downgrade to growth on the sequester cuts. Then at 2:30 PM comes the Chairman’s press conference, within which he may continue to speak positively about economic recovery. However, he is not expected to announce any time schedule for monetary policy change. He may offer some insight into the metrics that matter most to the Fed, and those are likely to remain employment and inflation relative. This information will dictate trade not only for Wednesday, but for the next few weeks. You won’t like what takes the baton after that… earnings.
We’ll get the regular mortgage activity data from the Mortgage Bankers Association Wednesday morning. Last week’s report showed a decrease in activity on higher mortgage rates, leading us to ask if higher interest rates might stall the housing recovery.
The weekly Petroleum Status Report is up for release at 10:30 AM EDT. Last week’s report covering the period ending March 8 showed crude oil inventories increased 2.6 million barrels to a level still well above the upper limit of the average range for this time of year. Total motor gasoline stocks fell by 3.6 million barrels to the middle of the average range for this time of year.
President Barack Obama visits Israel for the first time in his entire presidency. I expect this will raise speculation about Iran and spook oil prices and major integrated oils like Exxon Mobil (NYSE: XOM). In other international news, U.K. Finance Minister George Osborne will deliver his 2013 budget.
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