Friends
Well, we thought it might be a good idea to curb our enthusiasm after the melt up rally we saw after yesterday’s Fed meeting. It appeared to be a situation where the bears were caught offsides in their positioning leading to a short covering rally, more than it was “everything is great, just buy”. Today’s collapse in stock prices made us look more prescient than we would have liked, but the fact was that yesterday’s move seemed suspect.
Why the big drop in stock prices today? Well, maybe if you combine yesterday’s move higher with today’s drop you get to about where we should have gone after the Fed basically told us they were accelerating interest rate hikes, but still have no idea if it will work or if it is really even necessary. As we have said all year, this is going to take time to work through. The Fed was late to change monetary policy and now they are trying to catch up. In the meantime, the markets are trying to reprice both stocks and bonds (I don’t know enough about crypto currencies to comment on them only to say that they seem to go down when stocks go down, usually at a greater clip).
As for today, by the close the Dow Jones Industrial Average was down 1063 points to finish the day at 32,997. The S&P 500 was down 153 points to close at 4,146. The Nasdaq Composite Index was down 647 points to close at 12,317. Gold was up $10 to trade at $1,879 per ounce, while oil was up $.47 to trade at $108.28.
So, net/net, the Dow was down about 100 points by Thursday’s close after a nervous Fed meeting. Let’s keep that in perspective. Nothing has changed. Volatility is stunning to watch, but those pesky headwinds persist, and this monetary policy shift is going to take time to play out. Stay calm and as a wise investor once said, “don’t just do something, sit there”.
Have a nice evening everyone.
