The Fed Prepares to Raise Rates

The Federal Reserve is feeling confident about the state of the economy. According to its own Fed Minutes, released today, America’s central bank is looking to accelerate its plans for interest rate hikes and balance sheet reduction. This is fairly unsurprising, given the rampant discourse about inflation.

With this signal, the Fed might look to start its rate-raising campaign in March. That comes even amidst a rapid rise in COVID-19 cases in the U.S., which recently cropped up more than a million new cases of the virus in a single reporting day. Meanwhile, the 7-day average is nearing half a million. That makes the first wave, and its economic shutdown, look small by comparison.

The Fed isn’t feeling sick, though. Maybe that’s because employment is strong, hospitalizations have been surprisingly low, and a growing sentiment of “who cares about COVID?” is sweeping the economy. On the other hand, the market is feeling sick to its stomach — and that’s because the words “rate hike” are very scary to investors.

Indexes were battered by the news, with the Nasdaq falling 3.34% and the Russell 2000 retreating to the tune of 3.30%. The S&P 500 didn’t fare much better, down 1.94%.

More in   Policy

View All

Japan’s Big Policy Shift

After a decade-long period of monetary easing, the Bank of Japan is finally making some adjustments. The central bank surprised markets by allowing the 10-year Japanese government bond yield to rise to a nearly nine-year high. 📈

Governor Kazuo Ueda said this doesn’t mean the bank is giving up his predecessor, Haruhiko Kuroda’s, easy policy that included negative short-term rates and capping the bond yield through large government bond purchases. However, it does mean it’s giving the market more freedom to affect yields.

Read It

Powell’s Poetic Jackson Hole Speech

Fed Chair Jerome Powell’s highly-anticipated Jackson Hole speech initially sent the market indexes lower before rebounding to close the week mixed. 📝

Although he acknowledged the progress higher monetary policy has made on inflation, he reiterated that prices are still above the central bank’s target. As a result, the Fed is prepared to raise rates further and intends to hold policy at a restrictive level until confidence improves that inflation is sustainably moving towards its target. ⏯️

Read It

Investors Prep For A Political 2024

It’s been a good stretch of time since politics were at the center of market-related debates and analysis. Sure, the occasional debt ceiling scare and funding for specific industries were on the table, but since the pandemic, there’s not been much impacting the broader market.

However, that ended today with a flurry of news reminding investors that 2024 is an election year and will likely get complicated. 😬

Read It

Pot Stocks Heat Up

Stocks and ETFs related to the cannabis industry soared today, heating up again despite their habit of disappointing long-term investors. 🔥

The industry’s renewed interest came after a top official at the Department of Health and Human Services (HHS) recommended easing restrictions on marijuana. The official wrote to the Drug Enforcement Agency (DEA) Administrator Anne Milgram, calling for marijuana to be reclassified as a Schedule III drug under the Controlled Substances Act.

Read It