The dollar is flat. Oil is up, copper down. Gold and silver are up. Bonds are mixed.
Yesterday highlighted how sensitive the market can be to Fed talk. FOMC minutes revealed a desire to start shrinking the Fed’s $4.5 trillion balance sheet. This would take the form of not repurchasing matured securities and not re-investing dividends. Without this big buyer standing there as a buyer of last resort, it’s believed rates will move up quicker than expected. While this action shouldn’t be a surprise (it had to happen eventually), it could happen sooner than expected.
Also mentioned in the minutes was the high valuation of stocks, which confirms something I’ve said all along. The Fed claims they have a dual mandate – inflation and employment. But I’ve always said they also look at the stock market and world events to guide their decisions. If the Fed is worried about stocks being too high, there will certainly be less resistance raising rates.
The indexes are range bound, and there isn’t much to get overly excited about. Don’t force things right now.