The Federal Open Market Committee (FOMC) of the Federal Reserve Board holds eight scheduled meetings each year. The results of these meetings provide not only trading opportunities, but also extremely valuable data points for investments. The June 19-20 FOMC meeting just ended today.
The Federal Reserve has released its new economic projections. The chart below shows the difference between Federal Reserve economic projections released in April and more sober ones released today.
The chart shows the Fed has lowered growth projections. It is often said that a presidential election hinges on the unemployment rate. In April, the Fed projected unemployment rate of 7.8 to 8.0 for 2012. Now the Fed is projecting unemployment for 2012 to be in the range of 8.0 to 8.2.
These revised projections are going to act like a torpedo on Obama reelection campaign. Romney is likely to seize upon the higher unemployment rate projections by the Fed and use these projections for his contention that under Obama economy is getting worse.
Obama will not have much of a defense other than challenging the Fed by claiming that the projections by the Fed are wrong. Such a strategy is fraught with risk given that the Fed is still held in high esteem compared to other governmental institutions by a large segment of the population.
From an investment perspective, there are cross currents. Some will start buying stocks on the assumption that the probability of Romney election has increased. The other cross current in the stock market arises from the differential between the positioning of the majority of market participants before the Fed decision and the Fed decision…Read more at Forbes
