The market’s interpretation of the Federal Reserve's (Fed) statement and Janet Yellen's press conference was that while the Fed was more dovish than expected, an increase in interest rates will most likely happen in September unless economic data deteriorates. Overall, I don't think the outcome of the Fed meeting contained any surprises. The Fed reiterated that it can afford to be data-dependent but made sure to note of an improvement in employment—one of their key economic indicators. The Fed did accomplish its goal of not allowing the market to get ahead of itself with regard to a rate increase.
Next, I will be watching closely to see if the strength in stocks after the Fed meeting is sustainable alongside a steepening yield curve. This week also brings in focus the need for a solution to the Greek debt situation, as it continues to place a strain on the global economy. Headline risk will most likely be high during this period of Euro-land brinksmanship.
I continue to be cautious on both stock and bond prices in this environment.
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