The FOMC decision yesterday and the press conference by Jerome Powell to explain them have the goal of demonstrating that they are in control of the financial markets and on top of the economic situation. The problem is that they have now reached the limits of how far they can go in raising interest rates without smashing the economy and yet must say that they are going to succeed in pushing inflation down. The solution is to raise rates by a tiny 25 rate hike and then talk tough about possible future action. The Federal Reserve officials really cannot predict what will happen. Remember in 2021 they claimed that inflation was “transitory” and then were proven wrong. There is no guarantee that their current projection predictions will prove to be right this time. So, they must convince the public that they are in control of the situation even though they really are not.
Everyone is hoping that one more rate hike from the Fed will be enough to destroy inflation forever, because if it isn’t then things will get ugly in the future.
But I don’t think such a future is coming this year and that may be the fundamental reason the stock market is rallying now if you are looking for one.
It’s an uncertain environment, but investors and traders are best to focus on the overall technical market trends when making decisions as it is impossible to know or predict every thing and it is not necessary to do so as an investor.
When you do that yesterday’s action confirmed the overall trend and showed us once again how powerful the trend is in the gold, silver, and mining stocks, as the US dollar went down to a new low for the year on yesterday’s close.
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