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Equities Surprise As Fed Hikes

Scott Poore, AIF, AWMA, APMA

Markets survived the Fed meeting last week, as most sectors were higher after the 25 basis point rate hike.

The Fed raised rates as expected, however, the market was more interested in the language used by the Central Bank and their Chairman on Wednesday. Oddly, the Fed came out largely hawkish and the market shrugged off the news. The Fed continues to speak out of both sides of their proverbial mouth. While the Central Bank left open the possibility of more rate hikes, Chairman Powell stated in his press conference that further declines in inflation would also factor into their thinking. Inflation has declined for 6 consecutive months. We’ll find out next week if it will be 7 consecutive months of declines. On top of that, inflation is no longer the main concern of Americans, according to a new Gallup poll.


To-date, 50% of S&P 500 companies have reported 4th quarter earnings and 70% have exceeded analysts’ estimates. That trails the 5-year average of 77%.

In terms of revenues, 61% have come in above estimates, which is below the 5-year average of 69%. Meanwhile, the labor market was robust in January as the economy added 517,000 jobs, far and above the 185,000 expected. Both Initial Claims and Continuing Claims beat analysts' expectations last week. Initial Claims are near 9-month lows. This leaves room for additional rate hikes by the Fed and we will hear more from multiple Fed speakers this week about how long they may keep rates “higher for longer.”

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.


Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.


Past Performance does not guarantee future results.


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