Last week and yesterday were choppy for stocks. Crosscurrents about interest rate outlooks seem to be batting the market around. The past several days feel like a classic “bull and bear” fight, in which both animals are about equally matched.
Last week started lower on concerns about protests in China over its zero-Covid policy and comments by two Fed presidents that the Fed may continue its aggressive interest rate hike policy. Then stocks surged on Wednesday in a reverse-course. The catalyst was commentary by Fed Chair Jerome Powell. He confirmed the central bank’s intention to slow the pace of interest rate increases, probably starting this month. (Powell gave a nod to the market’s forecast that the Fed will only raise rates by 0.50% this month as opposed to 0.75%.)
Then stocks buckled on Friday following the monthly employment report, which showed a higher-than-expected increase in new job growth and an above-expectations jump in wage growth. All else being equal, those data might indicate a higher destination for interest rates because they show that wage inflation is persistent.
Overall, the major U.S. stock market indexes have been in a sideways range since November 11. Neither the bull nor the bear are winning this fight. It’s interesting to watch. But like a real fight, it’s best for most of us long-term investors to just watch and not join the day-to-day market fray.
