This afternoon at 2 p.m., the Federal Reserve will announce its rate policy decision. Markets widely expect the Fed to keep interest rates the same. The FOMC statement, however, will have a few substantial changes.
The Fed will indirectly address the negative impact of weakening U.S. trades on the economy. American consumers will reel from higher costs after they end up paying for tariffs. Stock markets are pricing this scenario. Starbucks (SBUX) and Chipotle (CMG) are trading at lows not seen in nearly a year. Conversely, strong brands like McDonald’s (MCD) will manage through the potential economic slowdown ahead.
The tech sector is preparing for a P/E decompression. Speculators are paying lower P/E multiples to price in a slowdown in tech companies. Although Google (GOOGL) is trading lower, its generous bid for Wix (WIX), a cybersecurity firm, hurt the stock.
EV-related names like Lucid Motors (LCID) bounced slightly while Tesla (TSLA) fell. Still, investors should anticipate a sharp drop in EV automotive sales. Consumers will avoid spending on expensive items when the economy risks slowing down.
The Fed may add language to the FOMC statement that suggests a rate cut by June. In three months, the central bank will have the job, inflation, and GDP data to measure the impact of tariffs on the U.S. economy.
Investors may buy the 20+ Year Treasury ETF (TLT) in anticipation of lower rates in 2025.
