We had an interesting Fed meeting yesterday. Their press statement talked a lot about raising rates and reducing QE, but during the follow-on press conference Fed Chairman Powell talked about how the Fed is very sensitive to market reactions to new policy.
Here is my interpretation of various reactions to the Fed announcement:
Fed: We will only raise rates slowly to 2-2.5% to stop inflation.
Bond Market: OK, we are good with that.
Stock Market: Great! With inflation at 6.8%, that's even more monetary stimulus that after the Financial Crisis!
Barrons: (clears throat) Uhhh, one small problem, people.
The Fed is explicitly telling us they do not want to lift interest rates high enough to stop inflation. This has important portfolio implications that we will address in coming weeks.
Robert Lloyd, CFA®
Chief Investment Officer
Lloyds Intrepid Wealth Management
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