My experience with Fed meetings is that the stock market usually heads off in the wrong direction on the release of the Fed statement and accompanying documents, but then quickly reverses course and moves in the way one might reasonably have predicted by actually reading the Fed materials.  This is not just computers trading.  The US market has operated this way for as long as I can remember.

Not this time, though.  Instead, the S&P made an immediate strong upward move   …and never looked back.

What’s different this time?

I think it’s the PDF where the Fed shows, among other things, where its voting members believe the Fed Funds rate will be at the end of this year, next year and in the longer term.

The previous release, in December 2014, showed the median estimate for 2015 at 1.0%.  For 2016, the figure was 2.5%.

Yesterday’s, in contrast, suggests the rate will be between 0.5% and 0.75% this December, and at 1.75% as we enter 2017.

That’s a big haircut for just three months.

The factors involved in the change are:

–the rise in the US$,

–moderation in domestic economic growth over the first quarter, and

–the lack of any sign of inflation.

Stocks and bonds spiked on the news.  The US$ came off its highs.

my take

Investors continue to be fixated on the numbers the Fed releases, and to be distrustful of any qualitative statement by the Fed saying it has taken the tragic 1990s example of Japan seriously and will err on the side of caution in raising rates.  Doesn’t make a whole lot of sense to me that the market doesn’t believe this, but it’s the way it is.

My stocks were having an unusually strong day yesterday before the Fed announcement.  They lost a bit of their relative strength afterward, though.  Arguably, this shows I was preparing for faster rate increases than the market now thinks will occur. I have no desire to become more aggressive, but I will be interested in how my stocks fare today.

I’ve been mulling over whether to try to play a potential rally in domestic-oriented EU stocks.  My experience is that this isn’t safe until the domestic currency in question has stopped falling.  I wonder if yesterday was a turning point?  Again, more data today.