Causing Stock Market to Jump: Yesterday's Quarter Point Rate Hike

Causing Stock Market to Jump: Yesterday's Quarter Point Rate Hike

The FOMC meeting yesterday caused a significant fundamental reaction to the market in real-time.

However, have you looked into what these meetings really consist of? Here's a little more information so you can be better informed for the next opportunity...

Federal Open Market Committee (FOMC) meetings are the primary means by which the Federal Reserve (the central bank of the United States) sets monetary policy. The decisions made by the FOMC during these meetings can have a significant impact on financial markets, including the stock market.

The stock market is driven by a variety of factors, including investor sentiment, economic data, and monetary policy. FOMC meetings and the decisions made during these meetings can have a significant impact on investor sentiment, as well as the direction of interest rates, which can in turn affect stock prices.

For example, if the FOMC announces an increase in interest rates, it can lead to a sell-off in the stock market, as higher interest rates can reduce economic growth and corporate profits. On the other hand, if the FOMC announces a decrease in interest rates, it can boost investor confidence and lead to a rally in the stock market, as lower interest rates can stimulate economic growth and boost corporate profits.

A recent article by CNBC states, "Aligning with market expectations, the rate-setting Federal Open Market Committee boosted the federal funds rate by 0.25 percentage point. That takes it to a target range of 4.5%-4.75%, the highest since October 2007". As well as, "The Fed is targeting the hikes to bring down inflation that, despite recent signs of slowing, is still running near its highest level since the early 1980s."

Additionally, the FOMC's post-meeting statement and outlook for the economy can also have a significant impact on the stock market. For example, if the FOMC is optimistic about the future of the economy, it can boost investor sentiment and lead to a rally in the stock market. Conversely, if the FOMC is pessimistic about the future of the economy, it can lead to a sell-off in the stock market.

Throughout the FOMC meeting, the sentiment began to change. "Major averages ultimately turned positive as market commentary focused on Powell’s somewhat optimistic comments on progress against inflation."

In summary, FOMC meetings and the decisions made during these meetings can have a significant impact on the stock market and should be closely monitored by investors and market participants.

“We can now say I think for the first time that the disinflationary process has started,” Powell said, while also noting that it would be “very premature to declare victory or to think we really got this".

Hold onto your horses, preserve capital, and make sure to do your best to research and follow our newsletter to see what the FED is up to.