U.S. stocks rose Wednesday as investors digested the Fed’s minutes from the Open Market Committee meeting in September. The meeting ended with a quarter-point interest rate reduction and divided opinions on the committee’s next steps.
The large-cap S&P 500 index rose 0.6%, the technology-focused Nasdaq Composite rose 1.1%, and the blue-chip Dow Jones Industrial Average was flat.
The Fed meeting minutes largely confirmed what many investors had already heard: that the U.S. employment situation had deteriorated while inflation risk “had either diminished or not increased.” The headlining takeaway was that “most” committee members believed it “appropriate to ease policy further over the remainder of this year.” In other words, given the information available in September, there would likely be at least one more rate reduction this year.
The Fed notes acknowledge the need to manage employment and inflation risks in the short term. There are also references to the evaluation of additional economic data to inform future rate actions. The Fed’s decision-making routinely relies on data, but the government shutdown complicates that process.
Scheduled employment releases have been delayed since the U.S. government closure began on October 1. A key inflation report, the Consumer Price index, due on October 15 is also in danger of late publication.
Stock futures for the S&P 500, Nasdaq 100 and Dow Jones are nearly flat ahead of the market open on Friday.
Today’s Trading Lesson
How should the government shutdown affect my investing strategy? If you are investing for the long-term, two experts say the temporary closure of the U.S. government should not change your investing strategy.
Acunto goes on to explain that U.S. economic fundamentals are unaffected by the shutdown so far. That would only change if the closure lasted long enough or displaced enough federal workers to disrupt primary government functions. These outcomes, in Acunto’s view, are highly unlikely.
Malkiel acknowledges that government shutdowns can be unsettling for investors, especially when they linger. But in the same way recessions come and go, any shutdown consequences should be temporary. In these situations, long-term investors should trust in their plan, ignore the volatility and resist impulsive actions.