The S&P500 continued its slow ‘grind higher’ last week, with the cash index eking out a small gain (of 18 points, i.e. 0.4 per cent).
Traded volumes on the NYSE were low, highlighting the general quietness of equity markets while levels of complacency remained elevated (e.g. with low volatility and put to call ratio readings).
The main event this week is the Fed’s two day meeting (starting tomorrow), with a policy announcement due Wednesday evening (at 7pm London time) followed by a press conference (7:30pm). As is often the case, it’s likely that the ‘grind higher’ in equities will continue into the meeting announcement. Often, though, markets make a local high on (or just after) Fed announcements/meetings.
On this occasion, market participants will be watching to see if the Fed hints at starting talks on tapering; Or simply re-emphasises its dovishness, and pushes back on the start of the timing of the talks. In that respect the outcome of this week’s press conference will be key for market direction over coming days and weeks.