The stock market bulls are rallying after the Federal Reserve shows that it may be reaching the end of its rate-hiking cycle. Fed chairman Jerome Powell in a speech on Wednesday said that is central bank is “near to” achieving its missions of maximum employment and price stability. He also stated that the Fed is “not actively considering raising rates beyond 3.5%.
Does inflation not affect the stock market anymore or are the drivers the inflation is still misunderstood
When we take a deeper look
Mostly, the stock market investors welcome this news, who had been worried about the aggressive hikes of the Fed and that its influence would move the economy into recession. The S&P 500 index rallied 1.5% on Wednesday and from the October lows, it is now more than 20%.
The Fed’s decision to stop raising rates provides the bulls in the stock market an opportunity to fight back. When the Fed has raised rates in the past, stock prices have frequently fallen as a result. For this reason, slower economic development may result from firms finding it more expensive to borrow money at higher interest rates.
The Fed has recently hinted that it could be through rising interest rates, therefore the stock market bulls may be able to overcome this obstacle. The stock market may continue to rise if the economy expands at a reasonable rate and if inflation is kept in check.
Besides all the inflation hikes, there are still risks in the stock market. The war in Ukraine could affect the market and the global economy might slow down again, anything can happen. But for now, the stock market bulls are rallying and feeling confident about the Fed’s decision to restrain the rate hikes. It gives them the confidence to fight back and continue the rally.
Bringing some analysts’ views on the decision of the Fed’s policymakers
- Micheal Arone, Chief of investment strategies at State Street global advisors said that “The Fed’s decision to pause its rate hikes is a relief for stock market investors. It gives them a chance to catch their breath and reassess the market.”
- Art Cashin, Senior market strategist at UBS “The Fed’s decision is not a guarantee that the stock market will continue to rally. But it does give the bulls a chance to fight back.”
- David Kelly, chief global strategies at JPMorgan Asset management said that “The Fed is still in a hawkish stance, but it is clear that they are starting to pay attention to the risks to the economy. This is a positive development for the stock market.”
In conclusion, it seems that the stock market bulls will be able to maintain the stock rallies and bond rallies. The Fed’s decision to stop its rate hiking for the positive development of the market gives the chance for bulls to be in peace and reevaluate the market and it could lead to further gains in the coming progressive months.
However, when someone is feeling good about the situation, some other analysts are warning that getting ahead themselves could be wrong, they argue that the situation could reverse. The Fed’s decision to pause the rate hikes does not only mean that the federal reserve bank is completing tightening monetary policy, but they could still raise rates later this year if inflation remains high.
If that is the case, then what is the conclusion
Overall, the direction of the stock market depends on many factors including the level of inflation, the pace of economic growth, and the actions of the Fed. Not only do the actions of the Fed affect the market rally, but it also depends on many factors. However, as of now the Fed’s decision to pause the hike rate is for positive economic development and so the stock market bulls can fight back and really enjoy the rallies with the expectation of big moves that might be good or bad.