United States stocks rose suddenly in anticipation of a crucial Federal Reserve meeting. A two-day meeting of policy makers will focus on whether or not to increase interest rates — something that has not been done in more than a decade.
Investors and economists who have debated the topic are split about what the Fed will or should do with the interest rates. There is much to consider on the topic, starting with the fact that the housing market is finally improving after years of dismal quarters. But there is also the fact that signs of a weaker global economy affecting America are evident, which is an issue we need to face.
The benchmark rate over the last seven years has been kept close to zero, which has supported the stock market and the economy, and there is no telling what an increase may do.
Gains in the stock market came in just after there were reports of weakness in the economy. Currently, retail sales are high while factory output has fallen. A survey last month confirmed that New York State factory output fell for two months straight.
“It’s almost as if the market believes the Fed isn’t going to do anything on Thursday. That’s why people are bidding it up,” said Kevin Mahn, chief investment officer at Hennion and Walsh Asset Management in New Jersey.
The Dow Jones rose by 228.89 points, Standard and Poor rose by 25.06 points, and Nasdaq rose by 54.76 points; industrial stocks led the pack, though it had been the worst hit by a recent global sell-off. Currently, there are around 9,000 publicly traded securities in the United States, so the increases come as a shock to many who invest in stocks.
“People have been overly pessimistic on global growth. I think they are going to be surprised,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, adding, “You are going to see a little bit more stability.”
The market has recovered some losses from previous months, but it is still down, and most investors agree that there is a long way to go to get out of the woods.
“Frankly, we are very concerned about the market,” Said Michael Ball of Weatherstone Capital Management. “You may get a bounce out of here, but without improving earnings and better global economic growth, it may be short-lived.” His company is playing it safe with cash holdings.
