A Federal Reserve Jolt

A Federal Reserve Jolt

• Federal Reserve Chairman Powell’s recent comments about future rate hikes are being perceived to be more hawkish.
• With interest rate risk rising, short-term volatility has increased further in a nervous market that was already working through some near-term issues.
• Bond yields have snapped higher and stocks have declined sharply.
• The parsing of the comments may be overstating a change in policy towards more hawkishness.
• The unfolding earnings season to provide a counter-point to rate angst provided forward guidance is maintained.

Stocks have been highly volatile in October as rising concerns about the direction of interest rates have taken center stage and diminished the risk appetite of investors.

As we have noted in the past, the three pillars of a stock market are the Economy, Earnings, and Interest Rates or the Federal Reserve. While the economy and earnings are still maintaining a robust trend, there has been a lot of volatility around interest rates.

The specter of rising interest rates has unnerved investors simply because bull markets don’t die of old age, but can often be choked to death by a restrictive monetary policy of the Federal Reserve.

Recent Comments

The Federal Reserve Chairman Jerome Powell and his voting board on the Federal Open Markets Committee (FOMC) have a very delicate task of managing an expansion that in its tenth year has already exceeded historical expectations. To say it bluntly, the objective for Team Powell is to avoid a monetary policy driven recession on their watch.

The rest of the article can be read here on Seeking Alpha.