COMMENT ON THE FED MEETING and the BROAD STOCK MARKET (4:00 pm EDST)
The Fed raised interest rates today by 1/2 point, which was more than expected (the Fed rarely raises rates more than 1/4 point in one session). The broad stock market responded by initially falling after the announcement at 2:00 pm, but then it recovered sharply as Fed Chairman Jerome Powell gave a press conference and assuaged Wall Street's fears by saying that there may be a few more 1/2 point increases, but then that would be it. He rejected the idea of a 75 basis point increase that some investors had been fearing, and he also said that he doesn't expect policy tightening to bring on a recession. Instead, he stated that he thought the Fed could bring down inflation gently and that the economy could have a "soft or softish landing". Powell's soothing rhetoric following the sharp rate increase boosted equity markets today, but will Wall Street's confidence last in the face of continuing inflation, rising oil prices and the ongoing Russia/Ukraine war?
We just entered a new and strong general reversal zone (May 3 - 12), so there is plenty of time for the broad stock market to make new lows in this time frame. However, if it does start rallying from here, we could instead see a significant top in the same period. We will stay on the sidelines for now as we wait to see if Powell's "pep talk" will have a lasting bullish effect on equity markets beyond a day or two.
The Fed raised interest rates today by 1/2 point, which was more than expected (the Fed rarely raises rates more than 1/4 point in one session). The broad stock market responded by initially falling after the announcement at 2:00 pm, but then it recovered sharply as Fed Chairman Jerome Powell gave a press conference and assuaged Wall Street's fears by saying that there may be a few more 1/2 point increases, but then that would be it. He rejected the idea of a 75 basis point increase that some investors had been fearing, and he also said that he doesn't expect policy tightening to bring on a recession. Instead, he stated that he thought the Fed could bring down inflation gently and that the economy could have a "soft or softish landing". Powell's soothing rhetoric following the sharp rate increase boosted equity markets today, but will Wall Street's confidence last in the face of continuing inflation, rising oil prices and the ongoing Russia/Ukraine war?
We just entered a new and strong general reversal zone (May 3 - 12), so there is plenty of time for the broad stock market to make new lows in this time frame. However, if it does start rallying from here, we could instead see a significant top in the same period. We will stay on the sidelines for now as we wait to see if Powell's "pep talk" will have a lasting bullish effect on equity markets beyond a day or two.
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