Last week’s market activity centered around the Federal Reserve’s December policy meeting. The Fed, as widely expected, raised rates by ½ percentage point, to a target range of 4.25% to 4.5%, the highest in 15 years. What did come as a surprise to many however, and rattled the market, was the guidance from the central bank.
The Federal Reserve indicated it will hike interest rates more than previously planned in 2023 and projected its Fed Funds rate will peak at a higher-than-expected 5.1%. Numerous Fed officials reiterated the hawkish (tight monetary policy) message and the “higher for longer” theme. After digesting the commentary and tone from the Fed last week, the result was market indigestion.
The Dow fell about 150 points after the Fed’s policy meeting on Wednesday, fell approximately 750 points on Thursday, and nearly 300 points on Friday. Adding to the selling pressure, was data showing
Retail Sales declined more than expected last month. The U.S. Department of Commerce reported retail sales fell .6% in November, even worse than the .3% drop markets were forecasting. Put it all together – the market is growing more concerned about a hawkish Fed, a slowing economy, and the possibility of an upcoming recession.
For the week as a whole – the Dow Jones Industrial Average fell 1.7% to 32,920 – the NASDAQ Composite shed 2.7% to 10,705 – while the Standard & Poor’s 500 Index dropped 2.1% to 3,852 – marking the second consecutive down week for the stock market. For our thoughts on this market action and the current state of Federal Reserve monetary policy…..
We don’t believe in trying to time the market in general, and we don’t think it makes sense (especially at this point), trying to “time” the Federal Reserve. The market is already down significantly, and when the Federal Reserve will pause, be done with raising rates, or pivot to rate cuts is uncertain. Also uncertain is how and when the market will react to, anticipate, and “price-in” those events. We advocate long-term investing and time in the market, as opposed to timing the market, or timing the Fed!All the best – Southport Station Financial Management, LLC