The Federal Reserve Owns the News Cycle

The Federal Reserve Owns the News Cycle

October 02, 2023

Why does it move like this?  You might find yourself asking that question when you see the markets up and down so much in the past week, past month or even past year.  You might even look at the markets at lunch, see that they’re up, then wake up the next morning only to find it down a bunch.  It can be frustrating, but the reality is that it’s just part of the process.  So what is that process?  Well, it really boils down to basics…buyers and sellers.  Let’s take a look at what seems to be the biggest mover lately…the Federal Reserve.

Year-to-date the S&P 500 is still up over 10%, but the Bloomberg Aggregate Bond Index is down 3%!  If you remember mid-year, we were up higher in both.  The buyers were seemingly in full force and running everything up.  Buyers thought that the interest rate policy of higher rates would soon end.  Then, we got some Federal Reserve news that put the brakes on everything for now.  That’s why you’re seeing the pullback from the highs.  The Fed has basically said they don’t plan on cutting rates any time soon, and they might even raise them a bit more this year.  They also relayed that this might be a higher-for-longer scenario.

You also might be wondering whether all the talk about a government shutdown is playing a roll.  Historically, it has not.  Congress usually takes a week or so after a shutdown to eventually pass spending bills and everyone moves on.  That’s how it’s worked historically so until something changes, we can’t attribute selloffs to that.

Back to the Fed…  I remember a time when they kept saying inflation was “transitory” and would end fairly quickly.  They were quite wrong back then and inflation has been very sticky.  My hope is that they are also quite wrong about their current rate policy.  I think that the Fed will eventually see that they’ve kept rates too high for too long.  This will force some interest rate cuts and create a cycle of rising bond prices again.  A decreasing interest rate policy should be a huge boon for all of our portfolios from Conservative to Aggressive.

Housekeeping:  We have some AMAZING news on the horizon.  We’ll send out a special commentary on it in the next few weeks.  But here’s the sneak peek if you’ve made it down this far.  We are starting our own RIA (Registered Investment Advisor).  Don’t worry, LPL is still going to be our Custodian, and your account isn’t transferring anywhere.  It’s a huge step for any firm in our line of business, and we couldn’t be more ecstatic to take this journey on.  Once we send out the specifics, you’ll get a much better picture of what this means.

Continued thanks for your trust in our firm.  We couldn’t exist without you!

Larry Mroczkowski


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risks, including the loss of principal.