With the key FOMC meeting over, key b/c it was their last official comment before QE ends at month end, what do we now have to look forward to in terms of their exit? IF the economy continues to show signs of improvement, the next move won’t be an actual policy change, it will be wording, the telegraph by Fed members in speeches topped off by the April FOMC statement that will tell us that rates won’t be “exceptionally low” anymore for an “extended period.” That’s step 1. While the FOMC won’t be raising the fed funds rate anytime soon, paying a higher rate of interest on reserves will come first (also not anytime soon) and this will lift all rates, step 2. Step 3 much later will be a fed funds hike. IF on the other hand the economy doesn’t gain further traction, rates will stay at current levels. Under both scenarios (less friendly Fed or lack of economic growth), I believe the stock market rally is approaching its end.
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