Yesterday the Federal Reserve did what they were supposed to do: They did not raise rates.
While this was widely anticipated, stocks sank as the Federal Open Market Committee (FOMC) statement was delivered. The S&P 500 closed down 0.94%, with the Nasdaq and Dow Jones closing down 1.53% and 0.23%, respectively.
In today’s Market 360, we’ll review the FOMC statement and Federal Reserve Chairman Jerome Powell’s remarks… and l’ll share where you should put your money no matter what the Fed does next.
FOMC Hawks Are Still Circling
Yesterday the FOMC decided to hold the benchmark rate at 5.25% to 5.5%. While this is good news, the benchmark rates still remain at a 22-year high.
During his press conference, Powell said:
We’re in a position to proceed carefully in determining the extent of additional policy firming. We want to see convincing evidence really that we have reached the appropriate level, and we’re seeing progress and we welcome that. But, you know, we need to see more progress before we’ll be willing to reach that conclusion.
The Fed’s dot plot – which is done every other meeting – showed the median projection for the federal funds rate at 5.6% by the end of the year. This implies that there will be at least one more rate hike between now and 2024.
But that’s not the only thing that is making investors cranky.
The dots also show increased forecasts for the fed funds rate at the end of 2024 to 5.1%, compared to the 4.6% in the previous survey. The projection for 2025 went up from 3.4% to 3.9%. This indicates fewer rate cuts this year and beyond.
Citigroup economist Andrew Hollenhorst said, “Chair Powell and the Fed sent an unambiguously hawkish higher-for-longer message at today’s FOMC meeting.”
The Inflation Story Continues…
“In terms of inflation, you are seeing,” Powell said yesterday, “The last three readings are very good readings.”
But he continued:
It’s only three readings. You know, we were well aware that we needed to see more than three readings. The only concern – and it just means this. If the economy comes in stronger than expected, that just means we’ll have to do more in terms of monetary policy to get back to 2%, because we will get back to 2%.
As I shared last week, while energy prices have increased, inflation on the whole is going down.
The market is broadening out. The U.S. consumer is driving the economy.
We are not strangers to Fed doublespeak. If unemployment crosses about 4%, like I anticipate because of the UAW expanding strike, I think that will cause the Fed to hesitate.
Earnings Season Is Upon Us
I think it’s time to celebrate the good earnings.
I personally loved the tone of my Growth Investor stocks yesterday morning – a lot of the dividend growth stocks were very firm and think we should just enjoy quarter-end window dressing and the next earnings season.
Bottom line: Don’t worry.
Regardless of what the Fed does next, your best defense is a good offense with fundamentally superior stocks.
I anticipate the final days of September should be especially good for these stocks, as this is when the quarter-end window dressing season will commence. Institutional investors will chase after companies that can consistently grow their sales and earnings… like my Growth Investor Buy List stocks.
So, if you want to prosper in the current environment, and you’re not sure where to start, join me at Growth Investor today. I am confident that these are the stocks that will emerge as the market leaders and deliver strong profits to investors.
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