Stock markets are firmly in the red this morning, as investors reassess their outlook in the wake of the FOMC decision.

  • FOMC sticks to its guns on policy.

  • Powell keeps throwing the ball to Congress, with little success so far.

  • Next rallies after improved forecasts outlined.

A lingering sense of disappointment hangs over global markets in the wake of the Fed meeting last night. Investors had evidently hoped for something much more concrete than the relatively vague policy outlook provided by Powell and co, with equities struggling in early trading and the dollar finding some support. From the accompanying press conference, it is clear that the Fed finds itself in a similar situation to the ECB; content to err on the side of caution for now with regard to doing any more, but painfully aware that fiscal stimulus needs to pick up the slack even as the chances of that stimulus seem to be receding. With an election looming neither party in Congress wishes to give their opponents anything that could be transmuted into electoral advantage, and so the deadlock goes on. Improved GDP forecasts could help firm up the dollar, but will have equity traders worrying that a faster-than-expected rebound will prompt the Fed to ease off stimulus more rapidly than expected.

There have been signs of life in retail stocks this week, with Next the latest to provide a rosier forecast. Of course, such a move is par for the course for Next, which likes to issue downbeat forecasts before duly upgrading them. But the firm is still a winner, outperforming the FTSE 100 in recent months (admittedly not a hard thing to do), and its rosier forecast chimes with John Lewis, which also took pains to stress that things were not as bad as previously feared. In such circumstances, that is the best that investors can hope for, although the strength in retail stocks could come into question if the UK heads back towards the kind of strict lockdown we saw back in the first half of the year.

Ahead of the open, we expect the Dow to start at 27,782, down 241 points from Wednesday’s close.

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