The Federal Reserve Will Be Sensitive to Market Risks

The Federal Reserve Will Be Sensitive to Market Risks

The Federal Reserve recently made reassuring statements about being sensitive to market requirements while also stressing its obligation to broader economic objectives.

Online trading brokerages with direct access trading platforms have risen in popularity in the past few years. And that surge has led many to check out stock trading and investing for themselves. However, a deep understanding of how the market works is essential to make successful trades.

The Importance of Investor Sentiment

Investor sentiment is significant for market performance. While it shouldn’t be the only thing given  importance, since there are other factors that come to play, it doesn’t take too long to realize that what investors feel about the market often influences how it ends up – whether the selling takes precedence over the buying or vice versa.

And investor sentiment isn’t only governed by the performance of companies that are represented by their stocks in the stock market, but also economic factors and the central bank of the United States, the Federal Reserve that decides, among other things, the interest rates. The Fed’s movements have often caused worry for investors. But it recently sought to calm those fears.

Fed Chairman’s Calming Words

The Fed has given some hope for investors and traders. Jerome Powell, Chairman of the Federal Reserve recently announced that the bank would be sensitive to the fears of investors and would adopt a less aggressive monetary policy. That bodes well for 2019. Specifically, Powell indicated flexibility in how the Fed would decide interest rate hikes in the future, considering the fact that the past few months have seen a great deal of volatility in the global stock markets.

Powell mentioned that the Fed would balance economic data against the many potential risks such as trade worries and fears of slowing worldwide growth. That’s just what investors wanted to hear. He did observe that the momentum of the US economy is strong, though.

Positive Reaction from the Market

Sure enough, these comments immediately sent the S&P 500 index up by over 3% on January 4, 2019 in trading in early afternoon. There was also a rise in US Treasury yields. Such performance is to be expected when the Fed makes reassuring statements. Powell’s commitment towards policy flexibility also applies to the balance sheet of the Fed where you have the monthly reductions.

Powell opined that the steady decline experienced in the bond holdings of the Fed wasn’t really having a major impact on the markets. But if the decline did begin to interfere with the objectives of stable inflation and strong employment, Powell maintained that there would be a policy change. That gave an indication that though economic data was something the Fed would be dependent on, it would take important decisions if its broader objectives weren’t being met.

Take advantage of the Fed moves, using a real-time, direct market access broker. TradeZero provides this level of access while also providing the ability to trade for free.

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Tradezero

TradeZero is an online broker dealer that offers commission free trading of the US equity markets, US equity and index options trading. Its clients receive up to 6 to 1 intraday leverage and the ability to trade the US markets without any pattern day trading rules. TradeZero clients have access to a variety of cutting edge trading platforms which include real-time streaming market data.

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