The markets wait on the Fed decision

Last week’s economic data may have little impact on this week’s Federal Reserve decision. In our view, odds are low that the Fed will raise rates on Thursday at the Federal Open Market Committee (FOMC) meeting.

Employment data remains solid, although there is little direct indication of acceleration in wage growth. Inflation expectations remain well contained and markets have stabilized.

If the Fed chooses to raise rates, we think this will remove some uncertainty from markets and may be a welcome development. If the Fed maintains current near zero interest rates, uncertainty could remain a factor and the market may downgrade its estimation of economic strength.

Last week’s economic data pointed to strength in the underlying U.S. economy, with the highest number of job openings in 15 years and rebounding small business optimism. University of Michigan preliminary September consumer confidence slid a little, perhaps indicating some concern regarding recent market volatility. We believe the U.S. economy remains on solid footing, supported by employment and income growth.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The organizations mentioned in this publication are not affiliates or associated with U.S. Bank in any way.

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