The Federal Reserve is expected to raise interest rates by a quarter percentage point today, as well as provide a glimpse into how the Trump administration’s tax reform overhaul could alter the economy.

NBC reports that “investors have barely blinked at the prospect of higher rates. The financial markets appear confident that the economy remains vigorous enough to withstand slightly higher borrowing costs.”

This will be the third time this year that the Fed has raised interest rates, which, according to NBC “could mean somewhat more expensive business and consumer loans, including mortgages.” However, the increases are also a testament to how far the economy has come since the financial crisis of 2008.

Will proposed U.S. tax reductions and the possible economic stimulus they could bring lead the Fed to project an even brighter outlook for the economy? If so, we could be looking at an increased number of rate hikes in the future. NBC reports some economists “predict four hikes next year on the belief that the Fed will feel compelled to accelerate its rate increases to prevent the economy, fueled by Republican tax cuts, from triggering high inflation.”

Sectors: Among Sector Benchmark ETFs, the average momentum score decreased from 17.64 to 17.55. Utilities significantly decreased in ranking over the week, down by 4. Cyclical sectors rose the most, followed by sensitive sectors, and lastly by defensive sectors, indicating an increased appetite for risk. Technology led the movement upward with a 7-point increase in its momentum score. Real Estate increased by 2 points. No sector is currently in the red.

Factors: The leading Factor Benchmark ETFs told a less clear story than sectors. Overall, the average score moved from 23 to 23.55. Momentum increased the most, up by 3 points. Small Size decreased by 5 points. Dividend Growth also fell, indicating that caution may be advised. Overall, all sectors are positive.

Global: Global Benchmark ETF momentum scores provided optimism for the week. The average score increased from 7.73 to 8.73 last week. The U.K. gained the most, up 4 points. Emerging Markets lost the most, down 4 points. Latin America is the only area in the red.  

Two Week Edge Chart

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