Don't look now fans, but there might be some hope creeping into the stock market. With just 23 trading days left in the year, there seems to be some hope that we've seen the bottom of the recent pullback.
To be sure, two consecutive green bars on the charts of the major indices does not a trend make. And with the S&P 500 a mere 1.5% off the lows of the move, the bears contend that they are by no means out of the game.
But, unless you've been sleeping in a cave, you know that there are three primary driving forces of the current market move. The first two appear to be the main factors affecting the near-term action, while the third is the longer-term issue traders are wrestling with.
- Fear the Fed will overshoot (and drag down the economy in the process)
- Fear the Trade War will escalate (and drag down the economy in the process)
- Fear that both economic and earnings growth will slow more than expected
The good news, and the primary reason behind the recent green on your screens, is that there seems to be some hope developing on the first two points.
How Far From Neutral?
On the Federal Reserve front, the question of the day is how far away the Fed is from the so-called "neutral" zone for Fed Funds rates. Referred to as "r*" by U.S. central bankers, the general thinking is that Fed Funds will need to reach the 3% range in order to be considered neither restrictive nor stimulative.
At issue is the FOMC's "view" on how much more rates need to rise. Recall that Fed Chair Jerome Powell sent the markets into a tizzy in October when he said that the current target range of 2% to 2.25% is ...