The financial markets are on edge this year each time Fed Chair Jerome Powell takes the podium following a Federal Open Market Committee (FOMC) meeting.
The chart below shows that the Standard & Poor’s 500 stock index has gained or lost an average of 1.9% following the first six two-day FOMC meetings in 2022. And after the most recent November 2nd meeting, stocks see-sawed throughout the session but eventually ended the day sharply lower after hearing from the Fed Chair.
Initially, investors cheered when the official FOMC statement suggested that the Fed would consider all data before adjusting rates again. But Powell crushed the enthusiasm in his post-meeting press conference, saying the current inflation data did not support any change in the Fed’s position.
In many ways, Powell’s tough talk is understandable. Throughout 2021, he told investors that inflation was “transitory” and the FOMC made no change to monetary policy. But in 2022, inflation has been stubbornly high, and it’s the Fed’s job to maintain price stability. So, in some ways, Powell wants to restore the Fed’s credibility.
We know this year has been unlike any other in terms of headline watching between comments from Federal Reserve members, economic data releases gauging its continued strength and more recently on mid terms elections but leave that to us to terms of its impact on portfolios. It is more important then ever for you to stay focused on long term objectives and leave the "noise" to us.
When the Fed Chair Talks, People Listen
November 09, 2022