Financial Professionals


FOMC Cheat Sheet

On Tuesday, September 21, the Federal Open Market Committee (FOMC) will hold its sixth meeting for 2010. During 2010, the FOMC meets a total of 8 times. Future meetings will occur on November 3 (the day after the midterm elections) and December 14. Investors should not expect any major policy adjustments at this meeting. Below is a "cheat sheet" for the meeting; most important for me is the market's ability to reverse a disturbing FOMC trend since the April 28th meeting.

  1. Priority One - Can the market reverse the trend of negative price action in the wake of the last three FOMC meetings? - Critical market highs have been established in the days preceding the April 28, June 23, and August 10 meetings. Potentially "defeating" the trend could provide a much needed psychological lift for the markets heading into Q4. If the market cannot, then, unfortunately, the Baseball Season of Frustration plays on.

  2. Source: Bloomberg

  3. Expect language that will reiterate "likely to warrant exceptionally low levels of the federal funds rate for an extended period"
  4. Expect measures to maintain the current size of the Fed's balance sheet above $2.05 trillion
  5. Expect the interest rate paid on bank reserve deposits to remain at 0.25%
  6. The potential SURPRISE - introducing new language to suggest the benefits of purchasing additional assets may outweigh the costs if economic data remains weak

    Past performance is not a guarantee of future results.

    Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.