The Fed Again Raised Interest Rates by 75 Basis Points and Markets Responded Positively: Market Commentary from Cabana’s CEO – July 28, 2022

4 months ago

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Yesterday, the Federal Reserve concluded its July meeting and announced another 75 basis point hike to the overnight federal funds rate. This was the consensus expectation and markets responded positively to the initial news. Chairman Powell gave a usual press conference afterward and provided what I believe to be the biggest impetus to move this market forward into the fall. He stated that decisions on future increases would be made based on the data at the time and that there are no pre-determined increases waiting in the wings for the September meeting. He also acknowledged that the economy is softening, which implies to investors that there is a possibility that most of the aggressive tightening is over. All this is consistent with the recent bounce in risk assets as well as the pullback in bond yields that we have seen since the middle of June. I discussed last week that I felt like we have a realistic shot at a market rally into September and perhaps beyond. What we saw yesterday is certainly helpful. I would also like to point out that the S&P 500 closed last week above its 50-day moving average for the first time in several months. This week it survived a test of that important technical line in the sand during the Monday and Tuesday pullback. For the time being, we appear to have put that issue in the rear-view mirror with a big move up by all the major indices. Finally, we have seen market breadth improve over the past few weeks. For a sustainable rally to occur, we need multiple sectors to participate. This has been lacking during rally attempts all year.  

Make no mistake, I think we are still in for some volatility and are looking at a plethora of earnings in the next few days. We also got second quarter GDP today, which makes for two straight quarters of negative GPD. This is a well-recognized definition of a recession. So, let’s not get too far ahead of ourselves with the excitement at a couple of weeks positive returns.  

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June 22, 2022

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