FED DOES NOTHING – BEST THING TO DO!

With US politics taking centerstage, that too the Presidential race down to the wire, it’s no surprise that the US Federal Reserve meet which happened today was a complete non-event. At this juncture, the Fed doing anything drastic would have shaken up the country which is already pretty unstable at the moment. Even while Jerome Powell was holding the Press Conference, it became amply clear that Biden was clearly on the path to victory.

The markets, there and here, have pretty much gone ahead with Biden winning the elections. While the BSE closed yesterday 724 points up, the S&P 500 in US jumped up more than 2% for the fourth straight day, having one the best weeks since April. Nasdaq too rose 3% and Dow over 1.5%.  

As widely expected, the Fed left the rates untouched with no changes. The interest rates as such are near zero, so no changes there and it also announced nothing on the bond purchasing remains unchanged too.

While politics is the only thing making news currently, the Fed seemed to be more worried about the pandemic, saying, “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”

Analysts there are predicting the count of those getting infecting rising exponentially and this in turn could lead to a negative GDP in the medium term. Thus if the focus shifts from the elections to Covid, maybe the Fed’s role to rise from mere monetary to fiscal policies too in the coming months, especially the next Fed meet scheduled for mid-Dec.

The much promised stimulus might not come in till the new President takes over in Jan and that means, till then not much can be expected from the Govt in terms of a rescue package, which in turn means that the onus to a large extent could be on the Fed.

The Bank of England also had its meet yesterday evening and it too did nothing, kept rates unchanged at 0.1% and also decided to continue with the existing programme of £100 billion of UK government bond purchases.

For us in India, the US elections are over and done with. At the moment, the market is in a good place but no one knows how long this will last with large parts of the Western world going into lockdown. We will continue to focus on domestic news – earnings and the outcome of the Bihar polls, scheduled for 10^th Nov. Rather than a broad outlook, best to have a stock-specific perspective.

Today, we expect earnings from ITC, Cipla, Vedanta, MRF, Balkrishna Inds, Ashok Leyland, Force Motors, Voltas, BEL, BHEL and many more – over 190 companies. We can expect stock-specific action accordingly.

Of course, the biggest trigger will be the much-expected stimulus from the Indian Govt – the news is that we could see a major infra push, which will not only attract investments but will also create the much needed employment.

And to think that all this is happening right in the midst of the worst pandemic the human race has seen in recent times!