Dow Jones, Nasdaq 100, S&P 500 Forecasts After The Fed And Into 2021

17-12-2020 11:51:26 AM

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DOW JONES, NASDAQ 100, S&P 500 FORECASTS:

• The Dow Jones, Nasdaq 100 and S&P 500 suffered slight pullbacks in the aftermath of the FOMC meeting until Chairman Powell offered his remarks.
• With Fed meetings finished, a covid vaccine found and a stimulus bill looking likely, what will drive price action in the coming weeks?
• Nasdaq Trading Basics: How to Trade Nasdaq 100

DOW JONES, NASDAQ 100, S&P 500 FORECASTS AFTER THE FED AND INTO 2021

US equities ticked modestly lower in the immediate aftermath of the Fed’s monetary policy statement and updated economic projections while the US Dollar surged higher. Given the reaction in both markets and the Fed’s optimism on the economy headed into the months ahead, it can be argued the statement itself had a slightly hawkish lean – at least relative to the current framework and market expectations. It was Fed Chairman Jerome Powell who then proceeded to talk down some of the perceived “hawkishness” and reiterate the Fed’s willingness to accommodate.

S&P 500 & US DOLLAR REACTION AFTER FOMC MEETING

Still, however, economic projections are the bread and butter of the Fed’s policy given the central bank’s data-driven approach. While Chairman Powell’s commentary may have worked to dissuade any hawkish notions, further Fed meetings may continue to reveal an improvement in the economy and therefore grow increasingly “hawkish” in future meetings - in my opinion. 

Once again, it is crucial to consider this hawkishness within the context of the current monetary policy framework, which means a “hawkish” statement might equate to slightly reduced bond purchases with rates held at 0 into 2023.

DOW JONES PRICE CHART: 4 – HOUR TIME FRAME (SEPTEMBER 2020 – DECEMBER 2020)