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How Did the Markets React to the Fed’s March Meeting Minutes?

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Equities gained

Equity markets considered the tone to be relatively more hawkish than what they had been hearing from policymakers, especially Chair Janet Yellen in the days leading up to the release. However, it was primarily the rise in oil prices and surging healthcare stocks that helped stock indices rise. Biotech stocks like Illumina (ILMN), Incyte (INCY), and Mylan N.V. (MYL) gained on April 6.

The Vanguard 500 Index Fund – Investor Class (VFINX) tracks the S&P 500 index (SPY). It rose 1.1% at the close of trade on April 6, 2016. A day later, it fell by 1.2%. The American Century Equity Income A (TWEAX) is actively managed—unlike VFINX. It returned 0.8% on April 6 and -0.8% on the next day. The Fidelity Contrafund (FCNTX) rose 1.1% on the day of the announcement. It fell by 1.1% the next day.

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Treasuries fell marginally

Treasury yields barely reacted to the March meeting minutes on a day-to-day basis. While Treasury bills ended unchanged on April 6 from the previous day, yields on the two-year note, going up to the 30-year bond, rose in the range of 1–4 basis points.

Among associated mutual funds, the Vanguard Long-Term Treasury Fund – Investor Class (VUSTX) invests in longer-maturity Treasuries. It fell by 0.7% on April 6. It rose 1.1% the next day. Meanwhile, the Oppenheimer Limited-Term Government Bond Fund – Class A (OPGVX) invests in shorter maturity Treasuries. It didn’t move on either day.

Dollar fell

The Fed’s March meeting minutes had a more definitive and direct impact on the US dollar. The US Dollar Index fell to multi-month lows. This showed that the US dollar weakened against its peers.

After looking at how financial markets reacted to the March meeting minutes, let’s look at how policymakers viewed various aspects of the US economy. We’ll start with their views on economic growth.

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