Medicare Agent News: Exxon's Dividend Potential

Tuesday, June 15, 2021

Exxon's Dividend Potential

By Nicholas Jasinski | Tuesday, June 15

Fed on Deck. The S&P 500 and Nasdaq Composite pulled back from their record highs today, on a busy day for economic data ahead of the Federal Reserve's next monetary policy decision tomorrow. All signs continue to point to a rapid rebound under way, but one that's causing shortages and bottlenecks that are quickly pushing up prices across the economy.

The S&P 500 closed down 0.2%, the Nasdaq lost 0.7%, and the Dow Jones Industrial Average fell 0.3%.

Barron's Randall Forsyth previewed the Federal Open Market Committee's June meeting, which concludes tomorrow. He notes that no one is expecting a change in interest rates, but that Chairman Jerome Powell could shed some light on officials' plans to begin reducing the Fed's bond purchases from their current rate of $120 billion a month.

Also interesting to watch will be FOMC members' latest projections of future interest rates, economic growth, and inflation. The last time officials updated their estimates was in March.

"The 'dot plot'—or graph of the FOMC members’ consensus guesses—puts the first hike all the way out past 2023," Randy wrote. "That seems a very long-term forecast, and as John Maynard Keynes famously pointed out, in the long run we’re all dead."

Market pricing implies at least one rate increase in 2023, and Fed officials' average target could move to that stance tomorrow as well. Economic growth projections are likely to rise, with the recovery running ahead of expectations.

The dots showing policy makers' latest views on future inflation could be most telling, however. Here's Joel Naroff, president and chief economist at Naroff Economics, writing to clients today:

The Fed appears willing to accept excessively high inflation for an extended period because it believes inflation pressures are only transitory. The biggest problem with the sentence I just wrote is that no one has any idea what is meant by 'extended period' and 'transitory.'

The Fed likes to use words and phrases that are like rice cakes: They seem to have substance but are all air. Those types of words provide flexibility and gives the members wiggle room...So, I don’t expect much out of this meeting and tomorrow’s statement and press conference will not likely be that telling.

What needs to be watched are the inflation numbers in the economic projections table. They were too low in the March report and how much they are raised will provide some insight into the concerns members have for future inflation.

No matter what the dots say, Powell is likely to emphasize the Fed's new commitment to hitting 2% average inflation over the course of the entire economic cycle. That could mean what looks like hawkish statement released at 2 p.m. that implies rate increases coming sooner, to be followed by a dovish press conference at 2:30 p.m. that emphasizes the Fed's patient stance.

Either way, it will be an active day of trading for those following growth and cyclical factors in the market.