CWS Market Review – March 24, 2023
“It is an old saying in Wall Street that the man who begins to speculate in stocks with the intention of making a fortune, usually goes broke, whereas the man who trades with a view of getting good interest on his money, sometimes gets rich.” – Charles Dow
On Wednesday, the Federal Reserve decided to hike interest rates for the ninth time in the past year. The target range for the Fed funds rate is now 4.75% to 5%. That’s the highest it’s been in more than 15 years. The vote was unanimous.
While this was widely expected, prior to the recent banking mess, some folks had been expecting a 0.5% rate increase. After all, inflation is still a problem. To be fair, inflation has faded somewhat, but it still needs to improve. On the other hand, since the banking mess, some folks thought the Fed might leave rates unchanged at this meeting.
Instead, the Fed did what was expected and gave us another 0.25% rate hike. The Fed also signaled to investors that it’s close to the end of its rate hikes.
This puts the Fed in a bind. If it continues to raise rates, then it’s telling investors that inflation is still a problem, and higher rates will eventually hurt the economy. But if the Fed forgoes rate hikes, that might signal to investors that the Fed thinks the economy is in bad shape.
The stock market initially rallied once the policy statement came out. That didn’t last long. In the final 72 minutes of trading on Wednesday, the S&P 500 shed 100 points.
That’s basically a micro version of what the market’s been doing for several weeks. The stock market has had a hard time gaining momentum in either direction. Every up move gets quickly pushed back, and every down move peters out. Consider that in the last 91 sessions, the S&P 500 has closed within 5% of 4,000 90 times.
In this week’s issue, we’ll take a closer look at the Fed’s decision and what it means for us. We’ll also look at this week’s Buy List earnings report from FactSet. The results were quite good, but traders pulled its shares down anyway. I’ll break it all down for you. I also have some Buy List updates. But first, let’s look at what Jay Powell and his friends at the FOMC had to say this week.