It’s fair to say the stock market has been on shaky ground for a few weeks now.
Ever since U.S. Federal Reserve Board Chairman Jerome Powell sounded a surprisingly hawkish tone in a pair of Senate hearings a few weeks back – signaling that the Fed’s dovish policy stance was on the cusp of making a huge pivot – investors have been on pins and needles, waiting for the Fed’s next official move.
That move came yesterday, and quite frankly, it saved the market.
Following a two-day meeting, the Fed updated its monetary policy stance yesterday. In the statement, press release, and press conference, the Fed and its Chairman did everything that the market was hoping they would do…
The market was looking for a $30-billion-a-month tapering program – the Fed announced just that.
The market was targeting three rate hikes for 2022 – the Fed telegraphed exactly that.
The market was hoping the Fed would say inflation is going to cool in 2022 – indeed, they forecasted for falling inflation in 2022 and 2023.
Ask, and you shall receive. That’s how yesterday went between investors and the Fed. Unsurprisingly, markets rallied in a big way.
The S&P 500 went from being down about 0.5% in midday trading, to finishing the day up 1.6%. That’s a sharp reversal.
The bullish reversal was particularly pronounced in high-flying tech stocks, because they are more rate-sensitive than the rest of the market. The ARK Innovation ETF (NYSEARCA:ARKK) – a collection of the market’s highest-flying tech stocks – was down 3.5% in early afternoon trading yesterday. By the close, the ARK Innovation ETF was up more than 2%. It popped another 0.5% after-hours.
That’s the biggest takeaway from all of this.
High-flying tech stocks have been crushed all year long – and especially over the past few weeks – amid concerns of runaway inflation and a hawkish Fed.
But yesterday, we got confirmation that both of those headwinds will likely ease in 2022.
The Fed is going to finally act to stymie inflation starting right now, but will do so in a very gradual, slow, and dovish manner. In other words, whereas 2021 was defined by rising inflation and fears of rapid Fed tightening, 2022 will be characterized by falling inflation and gradual Fed tightening.
It’s a nearly polar-opposite set-up… that will generate nearly polar-opposite results.
In 2021, high-flying tech stocks got crushed. In 2022, they’ll soar back to life.
And, even if you don’t believe me there, maybe you should believe history. The last time the Fed entered a rate hike cycle was between late 2016 and late 2018. Going into that rate hike cycle, growth stocks struggled – but once the rate hike cycle kicked off, growth stocks surged.
From December 2016 to December 2018 – while the Fed hiked rates eight different times – the ARK Innovation ETF rose more than 90%, while the rest of the market rose just 9%.
History is repeating itself. High-flying tech stocks are going to surge again in 2022. The question is: Are you going to be on the right side of history?
To help you do just that, I am pulling back the curtains on a special presentation I gave in Hollywood’s landmark Hudson Theater just a few weeks back.
In that presentation, I told folks about the coming technological takeover, how to position for it, and most importantly, I gave them an opportunity to learn the names and ticker symbols of the four best hypergrowth tech stocks to buy for 2022.
Interested in finding out more? Click here to learn how to position yourself for explosive stock market gains next year.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
