Market Extra: The Fed isn’t pivoting. Why were stock investors the last to know?

by | Aug 26, 2022 | Stock Market

After Friday’s brutal session for stocks, it appears equities were the last asset class to accept the notion that the Federal Reserve likely won’t be pivoting to a less aggressive monetary policy stance soon. Judging solely by movements in yields and exchange rates, it seems like bonds, gold and the dollar all days ago started pricing in the idea that the Fed funds rate would remain higher for longer.

Stocks, on the other hand, experienced a few hiccups over the past week. But it wasn’t until Friday, when Fed Chairman Jerome Powell put the “Fed pivot” narrative to rest, that stocks saw their big pullback. See: Euro returns to parity vs. the dollar as energy price spike raises eurozone economy fears To be sure, it’s not like stocks were completely blindsided. The S&P 500
very clearly hit a wall right around the 200-day moving average more than a week ago. But Friday’s session was more akin to the market carnage of the first half of 2022, with the Dow Jones Industrial Average
falling 1,000 points in a single session for the first time since May, while the S&P 500 and Nasdaq Composite
each recorded their biggest daily losses since mid-June on a percentage-point basis. See: Dow tumbles 950 points, Nasdaq drops 3.8% after Powell warns of pain to households in inflation battle Indeed, for stocks, Powell’s remarks about the economic pain that might result from the Fed’s rate hikes seemed t …

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