Wall St The Week Ahead: Fed meeting in spotlight

THE RECENT wobbly stretch in both stocks and bonds may persist for the short term if the US Federal Reserve this week lives up to expectations and signals the days of near-zero interest rates are numbered.

Anxiety over the two-day Fed policy meeting, centred on expectations the central bank will likely drop its pledge to keep interest rates low for a “considerable time”, was a primary driver behind stocks snapping a five-week winning streak this week and bonds absorbing their steepest losses in at least two months.

Top economists say they see at least even odds the Fed will drop the next phrase from its forward guidance, which means they see rate hikes coming by next March.

Still, few expect such a move would translate immediately into a long-term change in investors’ bullish view of stocks, especially relative to bonds.