Money & Investing – Banks.com

Image via Wikipedia

As the year draws to a close, the recent stock market rally is moderating. After surging ahead, the stock market has been moving higher at a much slower pace. Investors are looking ahead to what it means as economic stimulus measures are withdrawn as the economy begins to recover. MarketWatch reports on the evolving situation with the stock market:

Although the stock market’s climb has slowed, investors have been buying into defensive sectors such as health care and utilities, signs that “investors are starting to dig their heels in,” said Johnson.

“The reason for this is investors know the easy money days are behind us. We’re likely moving towards higher inflation and higher interest rates,” he said.

The Fed is widely expected to hold the benchmark interest rate at its record low when Chairman Ben Bernanke and central bankers conclude a two-day meeting this afternoon.

Investors will examine the wording of the Fed’s statement for any hints as to how long interest rates will stay at their current levels.

“The key words to watch for in the Fed’s statement will be whether they stick with the phrasing ‘exceptionally low’ in referring to the level of rates that will remain for ‘an extended period,’” said Peter Boockvar, equity strategist at Miller Tabak & Co.

“We know rates will stay low for a long time but we don’t know how low they will be,” Boockvar said.

Investors know that once the Fed starts raising interest rates as a way to keep a lid on inflation, things will change in the markets. Today the stock market is showing very modest gains as the market in general looks forward to economic improvement, but remains wary of what the Fed will do next. Tomorrow should a more interesting day as investors process the Fed policy statement from today.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.