Right now, we’re smack dab in the middle of third-quarter window dressing season. That means fund managers are realigning their portfolios, ditching losers and picking up the best-performing stocks from the quarter. But yesterday morning, stocks sold off around the globe. In today’s blog, I’ll reveal one reason that happened and show you how to profit from it.
The fallout from last week’s Federal Reserve meeting is still weighing heavily on the overall market. In fact, many Fed watchers are anxiously awaiting further comments from Fed Chair Janet Yellen as we speak.
At the conclusion of last week’s meeting, Yellen revealed members voted to stand pat this month and keep key interest rates between 1% and 1.25%. However, she also noted a December rate hike is still on the table. Not only that, but the Fed currently plans to raise rates three times in 2018.
Given that inflation still remains stubbornly below the Fed’s 2% target, Wall Street viewed this plan as hawkish. In fact, the Fed’s favorite inflation indicator, the Personal Consumption Expenditure (PCE) index, is now running at a 1.4% annual pace.
As long as the PCE remains below the Fed’s 2% target, they shouldn’t be in any hurry to raise key interest rates. So, in true Fed double-speak, Yellen confirmed this. She stated the Fed would not hesitate to alter its interest rate plan if inflation fails to materialize.
But that’s not even the biggest news from last week’s meeting. The biggest news was the Fed’s decision to start unwinding its $4.5 trillion balance sheet this October.
The central bank noted it will slowly reduce its assets, starting with $10 billion per month. Personally, I expect the credit markets will handle this reduction, and I commend the Fed for finally minimizing its balance sheet, which has quadrupled since the 2008 financial crisis.
Overall, Wall Street is using this and other distractions to take profits off the table in some of the market’s hottest stocks. In fact, up until yesterday’s pullback, the S&P 500 had rallied more than 1% in September. Technology stocks and global ADRs were the ones leading this charge higher. So, I view yesterday’s dip as a great buying opportunity in those sectors.
If you’re curious how your stocks fared in light of last week’s Fed announcement, I urge you to run your portfolio through my Portfolio Grader tool. Portfolio Grader will give you an easy-to-read A- through F-rating on over 5,000 companies. With these ratings you’ll know precisely what to expect from the stocks you own or are interested in. This is the foundation of every market-beating service I offer, and you can access it absolutely free.
But if you’re looking for a little more hands-on guidance, my Ultimate Growth stocks should benefit strongly from the recent buying pressure. They’ll also likely see a surge from the 90-day realignment of smart Beta and equally weighted ETFs next week. If you’re looking for the kinds of stocks that can thrive in today’s market, Ultimate Growth is the place for you.
However, if you’re still not ready to join Ultimate Growth, I urge you to stay tuned into this blog where I’ll continue revealing my insights on what the overall market has to offer.