The Federal Reserve meets this week to discuss their latest move with respect to interest rates.  Their meeting begins on Tuesday and concludes on Wednesday with the announcement of their decision at 2:15 pm Eastern on Wednesday.

The U.S. stock market rallied today in anticipation of further interest rate reductions from the Fed.  Many pundits are predicting a 0.50% interest rate reduction from this meeting.  However, if the Fed does not cut rates by this amount, stocks may fall, as traders may become less optimistic that the U.S. can avoid a recession.

Some folks have criticized the Fed for cutting interest rates by 0.75% last week, as those folks believed that the Fed should not be involved in helping to prevent stock market declines.  Thus, it will be interesting to see how this week's decision will turn out.

Regardless of the size of the interest rate reduction from this meeting, it is likely that the stock market will remain volatile for at least the next few weeks, as the earnings announcement season winds down. 

I always try to keep some cash available to invest, particularly when markets begin to get choppy.  This way, there are funds available to invest at points of temporary market decline, enabling me to lower my average cost basis and earn higher returns.  The key is that you must be willing to take risks when the overall market sentiment is at its most negative and people are fearful.  If you are able to buy when others are afraid, you have a greater chance of buying low and selling high.

Powered by ScribeFire.