{"id":61360,"date":"2022-09-21T23:20:00","date_gmt":"2022-09-22T06:20:00","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=61360"},"modified":"2022-09-22T17:19:02","modified_gmt":"2022-09-23T00:19:02","slug":"feds-hawks-escort-stocks-right-back-to-bear-market-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2022\/09\/21\/feds-hawks-escort-stocks-right-back-to-bear-market-the-market-breadth\/","title":{"rendered":"The Fed’s Hawks Escort Stocks Right Back to A Bear Market – The Market Breadth"},"content":{"rendered":"\n

Stock Market Commentary<\/strong>: <\/h2>\n\n\n\n

For those desperately looking for the “Fed pivot”<\/a>, today’s Federal Reserve statement on monetary policy<\/a> disappointed with a validation of the breakdown<\/a> leading into the Fed meeting. Fed Chair Jerome Powell was almost unrelenting from start to finish with his efforts to stay on message: inflation remains too high, and the Fed remains undeterred in driving rates higher to lean against pricing pressures. Last week’s CPI shocker<\/a> likely underlined the Fed’s determination to keep its hawks in flight. The stock market responded by sending the S&P 500 back into a bear market. Buyers got faked out for 15-20 minutes in the middle of the post-Fed selling.<\/p>\n\n\n\n

Powell’s comments on the housing market at the end of the press conference closed the door behind the hawks escorting the bears back into sentiment. Powell warned that shelter inflation will remain high for some time. Given persistent shelter inflation helped the Fed to finally take action against inflation<\/a>, I interpret this warning to mean the Fed will keep rates higher for longer and will stay more hawkish than many imagine.<\/p>\n\n\n\n

These next observations include the insights of a long-time reader. The pandemic-driven rush of liquidity into the economy is being definitively unwound. Just as policy makers had no real playbook for responding to the shutdown of the global economy 2 1\/2 years ago, there is no real playbook for fighting today’s confluence of inflationary pressures. That rush of liquidity helped set up the economy for today’s inflation. Accordingly, the run-off of that liquidity is likely to have unanticipated consequences. Thus, the Fed runs the risk of tightening too fast and too far as they race to reverse the mistake of leaving monetary policy overly accommodative for too long. In a world with near frictionless communications, digital money, and digital services, the hyper-stimulus from around the planet created massive economic distortions. I can only assume that what waits for the global economy on the other end of this cycle is yet one more distortion. In other words, I am bracing myself!<\/p>\n\n\n\n

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