On Monday March 20,2023 I sent the piece below as part of a note to a long-time client. It was around the expectations of what the Fed would do on 3/22/2023, which happens to be today, and is also the day I write The Weekly Update to get it through compliance for posting to our WSG website each Friday.
Here is what I wrote.
I suspect this week will be volatile, perhaps the beginning of the end of this contraction cycle. In my opinion the Fed increases a ¼%, but the verbiage from Powell will be the driver.
The Fed only has three tools.
- Monetary policy which they are now reducing.
- Interest rates which they are increasing, but likely closer to the end than most expect.
My observation is that the “talk” is by far the most powerful tool in the box. We will get more talk on Wednesday March 22, 2023!
And YES, we did! Today the valuations of Corporate America were up on the news of a +1/4% increase in interest rates, as I suggested in my note above.
And then, Federal Reserve Chairman Jerome Powell started his press meeting and just like that, we went from being up about a 1.5% on the S&P 500 to down -1.65%!
A roughly 3% swing is significant volatility for one day, I think!
As I wrote in line one of my quotes above, perhaps this is the beginning to the end of this contraction cycle. It could well be, yet we have one more monster to slay before the likely end and final capitulation. And that monster is the Debt Ceiling Debate which could cause a possible shut down of our government in early June.
That too could add volatility to the mix and why we will continue to be thoughtful, on purpose and intentional in adding to our investment positions form the cash we raised from sells last year.
In addition to a well thought out asset allocation and best of class investments we will need to continue being patient.
I’m interested in your thoughts, comments, and observations. Feel welcome to call, email or stop by the office and say Hi.
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.