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An Investor's Guide to Federal Reserve Policy Day

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Tomorrow at 2 p.m. the Federal Reserve will issue its latest policy statement -- but we already know the answer:

  • Economists surveyed by Bloomberg expect the Fed to continue tapering bond purchases by $10 billion, reducing the aggregate amount to $45 billion per month.
  • Interest rate policy will likely maintain "accommodative" while the FOMC considers a "wide range of information" on the "state of the economy."

While we've heard this before, here's something we haven't: Only about a quarter of Americans believe the economy is getting better, according to a new poll by Gary Langer Research for ABC News and the Washington Post.

As the U-6 "under" employment rate of 12.7 percent proves, people are still working in sub-standard, part-time jobs. Recovery has barely touched them. Headline gross domestic product growth of 4.1 percent may sound strong, but it's still well below the 50-year trend.

Fed officials are well acquainted with the data, and they too have expressed concern in recent days:

We suspect tomorrow's policy statement will reiterate two themes now very familiar to investors: The Fed will remain "vigilant" against deflation and "consider data" which may show signs of future growth.

We anticipate little change for the 10-year note in this status quo environment. It currently yields 2.71 percent. As trading vehicle, it has proven consistently a buy at 3.0 percent, and a sell at 2.5 percent. We will continue to advocate trading this range opportunistically.

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