Did The Fed Stick The Landing

From the start of 2022, the Federal Reserve set out to defeat inflation while avoiding a recession. Initially, Fed chair Jerome Powell stated that he believed the Federal Reserve had a decent chance of a “soft landing” for the economy as the Fed aggressively increased interest rates. However, as he began to receive pushback from Congress and economic data continuously opposed Fed Powell’s ideology of a soft landing, he began to pivot and stated that the Fed would not be afraid to “overshoot” if they felt it was necessary.

As a result, rates continued to be hiked, and the S&P 500 fell over 27%, reaching a low of $3584.00 in October of 2022. Almost every CNBC analyst, stock guru on X (Twitter), and economist screamed Powell did not know what he was doing, the Fed was going too far, and their actions would lead us into a deep recession. Well, with 2.25 rate points higher, relatively stable jobs, and a 30% rebound on the S&P 500, it’s almost safe to say Powell stuck the landing despite all opposition and the nay-sayers. 

So, what does this mean for you as an investor? Well, for one, we hope you’ve continued to invest throughout the drought, and second, you can put a bit more faith in the Fed’s plan moving forward. The dot plot is the best way to track their plan moving forward (see below) and shows their projections for the next few years. According to the most recent iteration of the dot plot, we can expect the Fed to decrease rates in early 2024, getting as low as 2.5 (rate) by 2025. This should result in lower home, auto, and credit rates for those who are patient enough to wait out this crazed, high-interest-rate environment. 

(https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html)

If you are on Twitter, now known as “X,” feel free to follow @ThrashCapital for more content!