NEW YORK (Reuters) – Investors this week will await the outcome of the Federal Reserve Board meeting on Wednesday, hoping for hints from the regulator following the recent tech-led selloff in US stocks.
So far, few believe the volatility in stocks, which has pushed the Nasdaq back 10% from its all-time high and hit other indices as well, heralds a larger sell-off that could lead the market astray after a six-month rally.
However, some fear such fluctuations could herald the beginning of an unstable period, as long-awaited fiscal aid stalled in the Senate and a US presidential election looming on the horizon. As a result, investors will wait for the Fed's views on the nascent US economic recovery and what the central bank can do if markets continue to fall.
“We have an economy that has not yet recovered from the pandemic,” said Nela Richardson, investment strategist at Edward Jones. “These risks, which were … perhaps a little hidden by all these incentives, are now starting to stand out and become more transparent.”
Analysts at BofA Global Research noted that September is generally the weakest month of the year, with stocks showing gains less than half the time, and the average return on the S&P 500 is minus 1%.
The bank's data shows that markets tend to fall in the weeks leading up to an election and then begin to rally. In this case, investors fear that the results of the November 3 vote will be unclear or controversial.
Investors hope to learn more about the Fed's strategic decision to allow for periods of higher inflation, as the regulator places greater emphasis on supporting the labor market.
In addition, the Fed will release fresh macroeconomic forecasts. Investors will look to them for clues about how quickly the central bank is expecting a recovery in labor markets and how soon it can raise rates from record lows.
(Lewis Krauskopf, with contributions by Karen Brettell. Translated by Alexey Kuzmin. Editor Marina Bobrova)