Did the Fed Cave Into Falling Stock Prices?

Did the Fed Cave Into Falling Stock Prices?

Posted On January 16, 2019 1:45 pm

Did the Fed cave into the falling stock prices? And did that flip flop set the market up for further pain?

When Jerome Powell took over as the head of the Federal Reserve two years ago, he made several things abundantly clear; he thought prior monetary policy had been too easy for too long and was determined to normalize rates. He wanted to draw down the balance sheet, he would front run any possibility of letting inflation pressures build, and most importantly, he would let the whims or whines of the stock market (or the President) deter him from accomplishing those goals.

But as Mike Tyson famously said, “Everyone has a plan until they get punched in the face.” And that punch, which came in the form of a 20% decline and stocks and multiple tweets from President Trump, landed in December forcing Powell to throw up his hands and retreat to a more accommodative corner.

Powell’s pacific posture took form during the Dec 18 FOMC meeting when he acknowledged softer economic data would cause him to more data dependent in terms of the path of rate hikes.

The bigger the backtrack was… Continue reading at StockNews.com

About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.