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The Fed: “More Work to Do”

Morning in the Markets

Briton Ryle by Briton Ryle
December 16, 2022
in Analysis
0
The Fed: “More Work to Do”

FED The Federal Reserve System the central banking system of the United States of America.

The Fed delivered a 50 basis point interest hike yesterday to bring rates to the 4.25% – 4.5% range. This was expected. In his press conference and statement after the rate hike announcement, Fed Chair Jerome Powell said two things that are important…

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First, Powell said the Fed has “more work to do.” 

And second, he said, “We think the appropriate thing to do now is to move to a slower pace.”

Both of these statements are consistent with expectations in that a couple more rate hikes are coming early next year. And that the Fed plans to pause after the March meeting.

In other words, Fed Chair Powell did not deviate from the script. 

Now, you may be wondering why index futures for the S&P 500, Dow Industrials, and Nasdaq are all 1% – 1.5% lower in the pre-market. After all, didn’t the Fed deliver what was expected? Shouldn’t that be seen as good news? 

Eh, I guess. But herein lies the problem with expectations: when you get what you want, it’s not really a surprise. You’ve already experienced the anticipation.

It reminds me of being a kid. Like when my brother and I got a joint Christmas present from our parents (usually a bike). In the Fall, Dad would take us to the Schwinn store for some mundane purchase like an innertube, and he’d watch us to see what bikes we thought were cool. Nobody spelled out what was going to happen, but we all kind of knew what was going to be under the tree. 

The dynamic is pretty much the same in the markets. The Fed didn’t give the market any new information that would affect stock prices. We already had a decent rally off last week’s lows. It’s reasonable for the market to now check and see just how bullish or bearish investors are after the Fed’s announcement. 

One of my mentors used to say that the first move after a Fed meeting is wrong. That is, if investors get all excited and push stocks higher after a Fed meeting, a reversal to the downside is inevitable. Conversely, if the market’s first move after a Fed meeting is lower, it’s wise to be on the lookout for a rally.

The first move after yesterday’s meeting is pretty obviously lower. And if you decided to torture yourself first thing in the morning and try to make sense of everything the Fed said yesterday, you may have found the source of this morning’s hand-wringing. For some reason, Powell decided to address the issue of interest cuts in 2023.

He said there won’t be any.

Now, I don’t know why rate cuts are being discussed when the Fed isn’t even done with rate hikes. It’s a meaningless discussion — a total red herring — and I would advise you to completely ignore it. 

So what do I think will happen? I’m on the lookout for a move higher off the opening lows today. And I’m looking at Meta (NASDAQ: META) for a potential upside trade. 

That’s your “Morning in the Markets” for today. Take care and I’ll talk to you tomorrow.

brits-sig

Briton Ryle
The Profit Sector

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Tags: Jerome PowellMETA (NASDAQ: META)The Fed
Briton Ryle

Briton Ryle

I’ve been trading, investing, and sharing my insights with individual investors since 1998.  Back then, the internet was not a very useful research tool. Armed with a library card and a huge budget for the printer, I’d scroll the microfiche for Wall Street Journal and Financial Times articles. I bought technical books on wireless technology and fiber optic networks. I traveled to Chicago to learn the secrets of stock options trading directly from the experts on the floor of the CBOE.  I’ve attended and spoken at more investor conferences than I can remember…. All because I’ve always taken my responsibility to my readers and subscribers very seriously. I refuse to parrot popular opinion, offer up half-baked ideas or publish incomplete or half-hearted research.  There is no shortcut to deep research... becoming as close to an expert on topics, trends, and technology as possible. And the rewards are life-changing. The very first stock I ever recommended was South Korea’s SK Telecom. My readers enjoyed a 150% profit in a matter of months.  And after 25 years, I’ve helped tens of thousands of readers change their financial fortunes.  A few months ago, I donated all my suits to Goodwill, pulled my name off the list of speakers for the big investor conferences, and left the big city for Southern Georgia. The plan was to retire to the banks of a tidal creek that splits off from the St. Mary’s river as it enters the Atlantic between Cumberland and Amelia islands... and trade stocks when I felt like it. But, I guess retirement wasn’t for me after all. I’m back, and this is gonna be something special. 

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© 2022 The Profit Sector, LLC. All rights reserved. Our website provides stock market research, commentary, and analysis. Information is provided “as is” and solely for information purposes, not for trading purposes or advice.

Nothing on this website should be considered personalized financial advice. Any investments recommended herein should be made only after consulting with your personal investment advisor and only after performing your own research and due diligence, including reviewing the prospectus or financial statements of the issuer of any security. The Profit Sector, its managers, its employees, affiliates and assigns (collectively "The Company") do not make any guarantee or warranty about the advice provided on this website or what is otherwise advertised above. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. The Company is not affiliated with, nor does it receive compensation from, any specific security. To the maximum extent permitted by law, the Company disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations provided herein prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.

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