Stock Market Insights: Stop talking

BY DR. RICHARD L. BAKER, AIF® Founder & Senior Wealth Advisor at Steadfast Wealth Management

Please stop talking! My high school science teacher explained in detail how a fly carries small particles from everything it lands on and probably was just sitting on roadkill before landing on our soda cans. I’m still freaked out about it thirty years later! Sometimes it’s better for everyone when a guy stops talking. On November 2, 2022, the Fed chairman should have stopped talking too, because the longer he spoke, the worse the market reacted.

Going into this month’s Fed meeting, markets were looking for a sign that the Fed might be ready to slow down their raising rate campaign. Everything was going well after the meeting until Chairman Powell kept talking and scared investors. Here’s how it went.

At 1 p.m. on the day of their meeting, the Fed released a statement saying they had raised rates by 0.75% as expected but suggested its future decisions would be taken with consideration of how their actions were affecting the economy. Stock prices jumped, and bond yields fell at this seemingly good news of a possibly slower pace in December or February, but that hope was short-lived.

At 1:30 p.m., Powell met with the press and was more negative than the committee’s group statement. He said they might slow rates, but the Fed might end up going higher than they’d previously predicted. So he was much more negative than people were expecting.

The message was received, and stocks quickly dropped. In the final hour and a half of that market day, the DOW fell 1.6% (505 points), the S&P 500 lost 2.5%, and the tech-heavy NASDAQ fell 3.4%. All because of a news conference.

As a side note, if I am ever taken hostage, please don’t let Jerome Powell negotiate my surrender. Powell makes the aunt in Pollyanna look like a Care Bear.

It has been a rough market year, but I’m still hopeful the remaining weeks will be better. November and December have been historically good for the market. Also, historically markets do well after mid-term elections. There are definitely some factors to dance around, which is why I believe active investment management is best, especially during times of volatility. Don’t focus on the day-to-day market news, especially news conferences, and stay focused on your investment plan and reaching your long-term goals.

My science teacher, Russ Rasmussen, was one of my favorites, and he enjoyed watching us squirm at the fly details. We knew he loved us and wanted what was best for us. He chose his words carefully and considered each word’s impact on his small class. I wish Chairman Powell were more like the great Rasmussen.

Have a blessed week!

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