Stocks End Lower After Fed Raises Rates As Expected

Plus 5 New Strong Buys for Today Stocks End Lower After Fed Raises Rates As Expected [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks End Lower After Fed Raises Rates As Expected [Stocks End Lower After Fed Raises Rates As Expected]Image: Bigstock Stocks closed lower in a volatile session yesterday following the Fed's widely expected 50 basis point rate hike announcement. Before the FOMC announcement, stocks were solidly in the green. But shortly after the announcement, they were all in the red. They flitted between gains and losses while Fed Chair, Jerome Powell, gave his press conference. But afterwards, stocks headed back down and stayed there until the close. The 50 basis point hike didn't break the market's mojo, but rather it was the comment they would likely have to hike rates higher than previously expected, and likely have to hold them there longer than previously expected. They also downwardly revised their GDP growth estimate for next year, placing full year 2023 at 0.5% growth from their previous estimate of 1.2%. And they upped their estimate for unemployment to 4.6% next year from their previous estimate of 4.4% (and the current rate of 3.7%). They also hiked their forecast for the Fed Funds rate next year to 5.1%. They had been calling for a 4.6% terminal rate previously. But recent comments and speeches by Mr. Powell and other Fed members had alluded to getting it closer to 5% or higher. So the 5.1% comment was not much of a surprise. If anything, it was a relief it wasn't any higher given how stubborn inflation has been to come down. With the Fed Funds midpoint now at 4.38%, they will need to raise rates by roughly 75 basis points next year to reach their target of 5.1%. Many are believing that they will go even slower next year, meaning 25 basis points in February, 25 bps in March, and finally another 25 bps in May. Mr. Powell himself said the speed at which they achieve their target is less important than what the target is and how long they hold it there. So that definitely underscores the slower pace idea. And it definitely seemed like the Fed was keen on a slower pace from here on out. And the slower they go, the less chance they have of overdoing it and crashing the economy. All in all, I did not interpret yesterday's hike or comments to be a negative. I believe it was largely in line with what they had been telegraphing, and what had been expected. Heading into today, stocks are up nicely for the week so far. In fact, they have been up sharply ever since the major indexes put in their key upside reversal on October 13. And it looks like there's more upside to go. Especially given the favorable seasonal tendencies: Q4 is typically the best quarter for stocks; December is one of the best months for stocks; and the post-midterm effect on the market is also positive (since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%). So make sure you're taking full advantage of it. That means getting into the right stocks and staying out of the wrong ones. Making money in the market is easier than you think. You don't have to reinvent the wheel. But there are a few tips you can use immediately on your very next trade to help you beat the market. And there's one in particular that can transform your portfolio. You can read all about it in my latest commentary... 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