Stocks Down After Fed Minutes

Plus 5 New Strong Buys for Today Stocks Down After Fed Minutes [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks Down After Fed Minutes [Stocks Down After Fed Minutes]Image: Bigstock Stocks closed sharply lower yesterday, led by the tech-heavy Nasdaq. The markets were under pressure from the opening bell. Profit taking began early. But then accelerated after the FOMC Minutes were released. The takeaway from the Minutes (of December's FOMC Meeting), was that 'it may become warranted to increase the federal funds rate sooner, or at a faster pace than participants had earlier anticipated.' But none of this is really new news. After the last Fed meeting in mid-December, they agreed to double their taper pace, which would fully unwind their bond-buying in March vs. June. And it was communicated that they would likely raise rates at least once, and possibly as many as three times (or four) in 2022. Yesterday's interpretation has people speculating that the first rate hike may come sooner (although, it's unlikely it will happen before QE is finished in March). And some are suggesting there could be as many as four rate hikes. But again, none of this is particularly revelatory. These are all things that were said last December, and that they had already told us. The Minutes just confirmed that. And officially, rates are projected at 0.9% by the end of 2022, 1.6% at the end of 2023, and 2.1% at the end of 2024. Everything we already knew back in December. So none of this should come as a surprise. And for perspective, it's important to understand that the Fed isn't talking about raising rates because the economy is weak. On the contrary, it's because it's so strong. In the Fed's own words, the economy remains "really strong," "consumer demand is very strong," and "incomes are very strong." Sounds pretty strong to me. Of course, the strength of the economy has been exacerbating inflation. But it's also important to remember that inflation doesn't tank stocks, 'high' interest rates do. And with rates projected at just 0.9% by the end of the year, rates would still be near historic lows, i.e., less than 1%. And it should be noted that over the last 50 years, there's never been a recession (aside from 2020's pandemic-induced plunge), when the Fed Funds rate was under 4%. So at quarter-point moves (even half-point moves), it would take years to get to that level. And given the official forecast of 2.1% by the end of 2024, that’s a far cry from 4%. To me, that means a clear path for strong growth for the foreseeable future. And that suggests a lot more upside to go for both the economy and the market. So use this pullback wisely to pick up some great stocks at cheaper prices. Just be sure to stick with proven, profitable stock picking strategies to do so. And avoid preventable mistakes. 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