Another round of hawkish rhetoric from the top central bank in the world was produced by the publication of the FOMC Meeting minutes on the 20th and 21st of September. Although the comments prevented the markets from developing a rebound from the multi-month lows, they also did not come as a surprise. The response strengthens the idea that relatively pessimistic expectations are included in.
The FOMC is confident that additional stricter policy is required as a result of the slower-than-anticipated decline in inflation as well as the ongoing upward pressure on prices brought on by the labor market’s tightness. In the parlance of central bankers, such a statement denotes a willingness to tighten conditions until company losses become noticeable.
through a decrease in available jobs and a halt to salary rise.
At the same time, the Fed acknowledges that the unemployment rate may grow over the currently anticipated 4%, which would represent a substantial increase from the current 3.5% and indicate job losses. In addition to Powell’s statement that we must “embrace economic pain,” this is a startling statement.
Surprisingly, the minutes were received quite evenly by the financial markets. It’s possible that prices already include too much negativity. The FOMC minutes’ hawkish tone and news of stronger-than-expected monthly PPI increase did not prompt the US indexes to move away from their multi-month lows.
The Nasdaq100, on the other hand, has recorded greater intraday lows, and the index futures are up 0.3% from the day’s start on Thursday as a result of a surge in buyers on dips toward 10700.
On the S&P 500’s dips below 3600 since the start of October, there is evident support. Now that the 200-week moving average is close to that level, a significant decline below it would push markets to reconsider the entire ten-year paradigm. As it occurred with the property market 12 years ago, the tenet that “stocks only go up” in the long run will be questioned. Market participants still believe that regulators will prevent this from happening this time, despite examples in history where the market failed to provide returns for decades.