Why did stocks rally after the Fed's decision?
Finally, the selloff is over.![]()
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Stocks rose after the release of a much-awaited Fed statement yesterday afternoon.
Why did stocks fall this week?
Low rates and easy-money policies from the Fed have helped fuel this year's extraordinary stock-market rally. But the easy-money policy caused inflation and the Fed need to accelerate taper or increase the interest rate to lower inflation. (Read more: What taper is and why it is so important)
Removing that support could send markets tumbling. That's why stocks fell ahead of a major decision by the Fed expected on how aggressively to combat inflation.
Why did stocks rally after the Fed's decision?
The biggest risk in the stock market is always uncertainty. Some investors said that uncertainty about the Fed's next moves, rather than unhappiness with the potential changes in monetary policy, may have weighed on stocks in recent sessions.
And the Fed said they will accelerate the pace on taper yesterday —— as market's expectation.
The Federal Reserve on Wednesday said it will phase out its bond-buying stimulus program by March -- much faster than previously planned -- and signaled it would raise interest rates more aggressively to combat high U.S. inflation.
Now, the biggest uncertainty has gone.
Fed Chair Jerome Powell also said that policy makers eventually "expect a gradual rate of policy firming." They don't anticipate raising rates before ending the taper process, but could hike before reaching full employment, he added.
I guess some investors were afraid of the interest rates hike. But now Powell said they won't, temporarily.
The market's reaction to the Federal Reserve's statement was "almost like a sigh of relief," said by an investment strategist. "It's like that uncertainty has been lifted."
What happened next?
Honestly, I don't know.![]()
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The majority of the Federal Reserve sees three interest rate hikes in 2022, according to the central bank's so-called dot plot of projections. This is not good news for stock market.
But in short term, the uncertainty has gone. The selloff (looks) is over.![]()
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Source: WSJ, FT, Bloomberg
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Tiggerpepper : Because they become ready to increase our income.
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