At its recent meeting, the Federal Reserve raised interest rates by a quarter point. This was the Fed’s eighth rate hike in a row, but it’s smallest since last March. Chairman Powell declared, “the disinflationary process has started.” The drop in inflation over the past three months allowed the Fed to slow their tightening.
While Powell acknowledged there was still more work for the Fed to do, and there are probably more hikes to come – in March and maybe even May – they are getting close to their stated target interest rate of 5% to 5.5%.
The light at the end of the tunnel is looking a bit brighter!
Both stock and bond markets reacted positively to the news, adding to the strong performance stocks have seen since the start of the year, with the S&P 500 and the Nasdaq 100 up 7.86% and 14.93%, respectively, as of February 3rd.1,2
Does this mean the bear market is over? It’s hard to tell. Corporate earnings are down, and the yield curve remains inverted. These are signs of a pending recession. Chairman Powell believes growth will slow, but we will avoid recession. Some economists disagree.
Could a slowdown already be priced into the market? We know that stocks are a forward-looking indicator and that the market bottomed on October 13, 2022 so it is possible that Powell may successfully orchestrate the elusive “soft landing”.
As we know, however, no one can predict the future. That’s why we’re here to help you handle whatever the markets throw at us and our team remains focused on your goals. We will continue to monitor portfolios, ensure investments are positioned properly, and take advantage of opportunities when we see them.
If you have specific questions, please reach out. We are only a phone call or email away.
1S&P 500 Year-to-date Return: https://www.slickcharts.com/sp500/returns/ytd
2Nasdaq 100 Tear-to date Return: https://www.slickcharts.com/nasdaq100/returns/ytd