Not surprisingly the Fed raised the Fed Funds rate a quarter of a point today. The range now stands at 4.75%-5%. Also, not surprisingly the Fed is hinting that they will be watching closely the consequences of the bank tremors we have felt in the last couple of weeks. The dot plot projections of the board participants are now indicating that a peak of just over 5% is the likely end game and that rates will be lower as we move into 2024 and 2025.
As usual after a Fed decision, stocks were all over the place, but in the end fell into the close. For the day, the Dow Jones Industrial Average was down 530 points to close at 32,030. The S&P 500 was down 65 points to close at 3,936. The Nasdaq Composite Index was down 190 points to close at 11,669. Gold was up $34 to trade at $1,975 per ounce, while oil was up $.45 to trade at $70.12 per barrel WTI.
Things have changed in the last couple of weeks. Something broke and now the Fed has to monitor what are the consequences. That should cool rate hikes in the future, but what we will discover over time is what damage was done. Then we’ll have to figure out how long it will take to fix the damage. Thus, our continued narrative that this is still going to take some time to play out. Raising rates from zero to 5% in 12 months was not going to happen without some consequences. Now we need to work through those consequences, heal and move forward. It will take some more time but heal we will.
Have a nice evening everyone.