The S&P 500 and Nasdaq Composite have recovered their losses since the April 2 tariff announcement. Investors are now watching market implications ahead of the Federal Reserve’s decision on Wednesday. The CME Group’s FedWatch tool shows a more than 95% chance that the central bank will keep rates in the current 4.25%-4.5% range.
Wall Street will closely analyze Chair Jerome Powell’s comments post-decision for hints on future policy moves. Craig Johnson, chief market technician at Piper Sandler, said, “We could be due for a pullback and a correction back toward a level of 5400, 5500 as we go through the Fed announcement.”
The tentative outlook ahead of the Fed announcement and tariff uncertainty has led many strategists to adopt a more defensive stance. Steve Sosnick, chief strategist at Interactive Brokers, said, “The crux of the question is, does the Fed want to risk moving before the 90-day tariff moratorium expires?”
Keith Lerner, co-chief investment officer at Truist, is overweight on utilities, financials, and communication services sectors going into the Fed decision.
We think even if the economy slows, some of these big tech names will continue to do fine,” said Lerner. Utilities are the best-performing sector in the S&P 500 this year, gaining more than 6%.
Fed rate decision ahead
Financials have advanced 2% in the same period, while communication services are down 2%. Adam Patti, CEO of VistaShares, suggests tech and AI-focused stocks as safe plays going into the meeting but believes there is also potential for a reacceleration to the upside. “I think the AI trade is going to come back with a vengeance,” said Patti.
Piper Sandler’s Johnson also sees tech as a defensive move with upside potential, particularly outside of the major tech players. “Software companies look more attractive than semiconductor companies right now,” said Johnson. Malcolm Ethridge, managing partner of Capital Area Group, believes there is an opportunity in short-term bonds.
“This would definitely be the time I would want to lock in those rates,” said Ethridge. Investors remain cautious but prepared, with strategic moves in utilities, financials, tech, and short-term bonds, anticipating clarity from the Federal Reserve’s upcoming announcement.
