FOMC Has No Clue Why Growth is Slow

Following Wednesday's Federal Open Market Committee meeting, Federal Reserve Chairman Ben Bernanke held a press conference. During the press conference, Bernanke reiterated the FOMC's view that economic growth was slower than anticipated. When asked why, Bernanke stated that the FOMC had “no precise read” on why slower growth was persisting.Bernanke explained the FOMC's outlook for future growth, citing projections that unemployment would be roughly 7.3% in 2013.Perhaps in an effort to deflect the blame for the poor state of the economy, Bernanke explained that future economic growth was not solely based on the policy of the Federal Reserve.Bernanke did not focus solely on domestic growth. When questioned, he tackled the other major economic issues including Greece and the debt ceiling.On Greece, Bernanke stated that the Fed was in contact with European authorities, but was not directly involved in any bailout negotiations. He acknowledged that Greece may pose a financial contagion risk, but downplayed the effect that a Greek default would have on the financial system in the United States.Regarding the debate over the debt ceiling, Bernanke had nothing new to say.Bernanke explained that the U.S.'s debt problems were long-term in nature, and that the debate regarding budget cuts should be focused on long-term debt projections.Bernanke declined to rule out further easing, but did not hint at anything in the immediate future. Gold and silver, which had been rallying earlier in the day, declined after the release of the Fed's statement, and fell further after Bernanke spoke.Action ItemsBullish: Traders who believe that the Fed's actions have been positive, and that the domestic market is poised for a rebound, might want to consider the following trades:

• Buy Pro Shares Ultra QQQ (NYSE: QLD) in a long play on the NASDAQ. If the NASDAQ rallies on economic growth, QLD may do well.
• Buy Power Shares DB US Dollar Bullish Index (NYSE: UUP) in a long play on the dollar. A stronger American economy might mean a stronger dollar, which could be bullish for UUP.

Bearish: Traders who believe that the Fed is misguided in its actions, and that the domestic market is due for a contraction, may consider taking positions in the following:

• ProShares Ultra Short Dow 30 (NYSE: DXD) is a short Dow Jones play. If the markets decline, DXD may do well.
• SPDR Gold Trust (NYSE: GLD) is a long play on gold. Gold traditionally does well in times of economic turbulence, and may rally, especially if the Fed allows inflation to get out of hand.

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