FOMC Statement Modestly Hawkish, But Yellen's Rationale Very Bullish for Stock Market

Today's FOMC Statement was modestly hawkish, but Yellen's rationale for not tightening at this meeting is very bullish for the stock market.

1.  The Statement was modestly hawkish, as it acknowledged that "the case for an increase in the federal funds rate has strengthened." 

2.   But, Yellen's rationale for not tightening at this meeting is very bullish for the stock market, as it was pro-growth.  It echoed Fed Governor Brainard's point last week that the labor market is not tightening even with strong job growth.   In other words, labor market capacity has been expanding, as more people are being drawn back into the labor market, and thus should accommodate continued decent growth without creating inflationary pressures.

       a.   In her prepared remarks, Yellen emphasized that the steady 4.9% Unemployment Rate in the face of strong Payroll gains allowed the Fed to tolerate economic growth, presumably 2+% GDP, and thus allowed the Fed not to hike today.
       
        b.  The Fed's projections have the Unemployment Rate falling to 4.8% in Q416, 4.6% in Q417, and 4.5% in Q418.  Moreover, these projections see a higher funds rate in each of these years.
 
        c.  This suggests that as long as the Unemployment Rate remains in the 4.9-5.0% range, the Fed may very well continue to refrain from hiking the funds rate.

         d.  And, continuing decent GDP growth is a positive for the profits outlook.