With the intense spark of higher volatility seemingly behind us — at least for now — investors are looking ahead at the possibility of four interest rate hikes this year rather than the presumed three telegraphed by the Federal Reserve last year, Prudential’s Chief Market Strategist Quincy Krosby said Tuesday in her weekly “Connecting the Dots” outlook.
“The market wants to hear what the Fed is thinking about the potential for inflation gaining some traction,” Krosby said. “We really won’t know for certain until new Federal Reserve Chair Jerome Powell goes to Capitol Hill at the end of the month and testifies before two committees.”
Fed speakers this week may offer a deeper perspective on monetary policy. Minutes from the last FOMC (Federal Open Market Committee) meeting will be released on Wednesday, and given the concern over the pace of higher rates, analysts will scour the minutes for projections on economic growth and inflation.
Expect business media to focus on inflation, Treasury yields, and the Federal Reserve’s response, particularly with a new Fed chairman at the helm.
“$258 billion dollars of treasurys—2-year, 5-year, and 7-year notes—are coming to market, and we need to see where they’ll be priced and what the yield will be,” Krosby said.
Although the earnings season is winding down, Home Depot and Walmart should garner market attention.
“There are still questions in this market as to whether or not the bottom was met,” Krosby said. “That said, the market did gain momentum over the last week. The market needs a catalyst to move higher. A flat market isn’t bad, particularly after the gains we had last week.”
This week’s data releases:
Wednesday: PMI Composite Flash; Existing Home Sales; FOMC Minutes
Thursday: Leading Indicators
Read Quincy Krosby’s full Q1 Market Commentary: Turning the Page.
The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This is solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.