When stock markets open, the direction will not matter. Today, the FOMC (Federal Reserve Open Markets Committee) announces its interest rate decision at 2 p.m. After the last hot inflation report, markets already expect no change in rates. Yet worries will persist throughout today.
The Fed needs to change its tone about cutting rates “sometime this year.” Instead, it should address why inflation continues to rise. Unfortunately, the Fed will not comment directly about the high government spending levels that fuel inflation. Investors may only buy aerospace and defense contractors instead. They benefit from the billions in increased spending on military equipment.
Add Lockheed Martin (LMT), AeroVironment (AVAV), and RTX (RTX) to the stock buying list. GE Aerospace (GE) is also attractive while Boeing (BA) is a stock to avoid.
Bond Yields
Bond yields are already holding the 5.0% level. The longer-term bonds (TLT) are on a firm downtrend that began last Dec. Yields for the 20+ U.S. Treasury climbed steadily despite the media claiming that rates would fall.
Despite the bond market offering more attractive returns than stocks, market panic is absent. The volatility (VXX) continues to slump.
This afternoon at 2 p.m., watch the bond market’s reaction to the FOMC statement. The stock market’s move is less important at this time.
