— Market history of the past 11 years confirms this assertion.
— It is a gift given to us by the media … tales “full of sound and fury, signifying nothing.”
–Today’s report was par for the course, causing a knee-jerk 382 point drop in the Dow followed by a barrage of inane, Powell parsing commentary.
–What’s the downside?
Irrefutable proof of Fed Day being a good day to Buy
This may seem pretty simple-minded on my part but stay with me for a moment and you will see the method in my argument.
There are 8 regularly schedule Fed Open Market Committee meetings each year after which the chairman holds a press conference. Since the second quarter of 2009 (the very beginning of this bull market) there have been approximately 88 of these confabs, each followed by pressers. As we have just made new all time highs in both the S&P 500 and Nasdaq anyone who bought on any of those OMC commentary days (including the meeting just previous to the current) meeting is a winner.
Sure, there were meetings when, due to the parlance of the chairman or the actual tapering of the EMERGENCY MEASURE known as QUANTITATIVE EASING (QE), after which the market suffered severe, but temporary weakness. Anyone who bought on those days still came out a winner.
Importantly, as it pertains to the current extremely accommodative monetary policy, WE ARE NOT IN AN EMERGENCY! Plus we have had a huge injection of cash via fiscal policy (an absolute ton of stimulus). We don’t need to have the 10-year Treasury yielding under 1.5%.We can survive normalizing rates.
Rising interest rates and inflation are normal and to be expected as symptomatic of a strong economy. They are not a sign of impending doom.
Fed Day swoons are gifts from the media
The media cares much more about retaining your attention than informing you. If they cared about informing you the level of attention paid to these meetings would be significantly lower.
The media build-up to this meeting began last week with the experts at CNBC blaming the quiet market on anticipation of today’s meeting. After the meeting a pundit quoted by CNBC said, “this is not what the market expected”(sound and fury/noise). To this, I ask,”How does he know?” Give me a break! It is not the market reacting but computers and traders programmed by the media to view any increase in inflation or rates as a negative.
My opinion … there was nothing new, negative or disquieting said here.
What’s the downside?
This is not a perfect world where all stocks will benefit from a stronger economy and higher inflation (greater pricing power). Those high multiple growth names that have fared so well over the past few years may be vulnerable as higher rates will compress multiples. These are stocks where bets have been placed on distant future earnings growth. Meanwhile, those ‘here and now’ stocks that have greater economic sensitivity should shine. In my opinion the downside will depend on what you’re invested in rather than just being invested.
Bottom Line: Most of the media frenzy about Fed OMC day is noise. Don’t let the media scare you out of the market.