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Why did stocks rally after Powell's speech?

Smart Jerrywrote a column01/12/2022 19:37
Last month I wrote an article to talk about "Why did stocks rally after the Fed's decision?" In that article, I said: The biggest risk in the stock market is always uncertainty.
What happened last month?
In December, the uncertainties were:
1. Taper will speed up
2. Interest rates rise during taper
After the market slump, these uncertainties were price in.
And on Dec.15, Fed Chair Jerome Powell answered:
1. Taper will speed up → YES (meet market expectation)
2. Interest rates rise during taper → NO (better than market expectation)
The market slump before Powell's speech reflected all uncertainties. So the market rallied after the Fed's decision —— because no interest rates hike before finishing taper.
Why did stocks rally after Powell's speech?
Why did stocks rally after Powell's speech yesterday?
In the minutes released on Jan.5, there were two uncertainties from the Fed's words:
1. Interest rates rise before March
2. Start cutting the amount of bonds it is holding (another way to cut market liquidity)
Both of them are tightening policies. Then the stock market started to slip, especially growth stocks —— they are more sensitive to interest rates changes.
Why did stocks rally after Powell's speech?
Yesterday, Fed Chair Jerome Powell answered:
1. Interest rates rise before March → NO (better than market expectation)
2. Start cutting the amount of bonds it is holding → Maybe (meet market expectation)
Yes, both of them were positive news for stock market, at present.
What happened next?
- The best days for growth stocks may be already behind us.
- But in short term, the uncertainty has gone. The selloff (looks) is over.
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13 Comments · 17K Views
Smart Jerry
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  • MonkeyGee : because Powell never said rate increase date.

  • 70183628 : Why did the market drop big time on Dec 16 after the rally on Dec 15?  How do you know if it is not going to repeat this time?

  • GM 1 MonkeyGee: Read somewhere it’ll be after March?

  • Blitzery : They cannot afford another economy slump. If they cannot handle the situation well they will only end up printing more money diluting their economy. They should realise that taxing from the low and middle income will not help in the long run because essentials are becoming more unaffordable. They should tax the rich accordingly and reasonably.

  • Riding Star : Share drop because omicron virus. It had seen some stocks had pull back from the peak.

  • Revelations 6 : It’s not about bonds or interest rates. It’s not about inflation or the stock market. It’s not about crypto or what good for our country and you and me. It’s all about the Socialist Democratic Spendocrates, Chairman Joe Biden, being in control of every aspect of your life. If they are not in control of it then it’s out of control and they need to rein it in. Everyone knows what needs to be done but that doesn’t mean Powell is going to do it. We all saw this inflation coming and he wouldn’t even admit that it was. Only if late has he started to react to things he should have been proactively heading off at the pass. It seems to be a trait of the socialist. No forward vision. So when your dealing with a scatter brained, indecision, procrastinating Fed Chairman that has both feet firmly planted in the air, you can’t help but to have an economy, stock market, cryptocurrency and fiat currency that looks like an epileptic seizure when you try and chart it.

  • 12moon : Good insight

  • 70551371 Revelations 6: And is that different than what was being under the last presidency. Let’s just say it, Democrat or Republicans, this is just a game

  • NgKennykk : Nice

  • WinningTrader : if it is a selloff, who is buying?

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