Founded in 1992, Jackson Wealth Management is an independent, fee-only investment advisor. Founder George P. Jackson has been the CEO/CIO of the firm since its inception with the goal of delivering value to his clients and his associates. 

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Federal Reserve Board Flip Flops

November 28, 2018

 

11/28/2018 12:56 PM

 

Dear Friends,

 

Interest Rates – are the most important thing for the economy and stocks.

 

The Federal Reserve Board, with control of interest rates – wields HUGE POWER.

 

“Don’t Fight the Fed” has been a long-term Wall Street saying, for a very valid reason.

 

 

 

Federal Reserve Chairman Jerome Powell

“Interest rates are still accommodative, but we're gradually moving to a place where they will be neutral," Powell added. "We may go past neutral, but, we're a long way from neutral at this point, probably. October 3, 2018

 

IMPLICATION: More Federal Reserve Board interest rate hikes are coming.

 

TODAY, November 28, 2018 just 56 days later after the October 3 comment that sent stock markets lower:

 

Powell says interest rates are "just below" range of estimates for neutral policy.

 

IMPLICATION: Being 'near neutral' suggests the Federal Reserve Board is nearly done hiking interest rates.

 

 

Since Powell’s October 3 comment –

 

US large-cap stocks dropped 10%

 

 

Technology heavy Nasdaq Composite index dropped 14%.

 

 

The Dow Jones US Internet Stocks Index dropped 16%

 

 

US Dollar index rose 2.48%

 

 

Summary

The Federal Reserve Board makes it more of a challenge to navigate the stock market, since they are a wild card with policy, and they have so much power.

 

We will give Chairman Powell a pass this time for the huge flip flop in interest rate policy from “we’re a long way from neutral interest rates” on October 3 to we’re “just below neutral” on November 28 just 56 days later – since he is new on the job – but, no doubt he caused major declines in stock markets around the world with his October 3 remarks.

 

Today, no doubt, is great news for the economy and the stock market.

 

 

 

 

 

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