Stock prices fell last week in response to the Fed’s plan to combat inflation, which staked out a more aggressive stance than investors had anticipated.
The Standard & Poor’s 500 fell 1.27%, while the Dow Jones Industrial Average slipped 0.28%. The Nasdaq Composite index dropped 3.86% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slid 2.05%.1,2,3
Fed Roils Markets
After a positive start to the week, stock prices turned lower on a more hawkish tone from Fed officials. On Tuesday, investors were surprised by comments from Fed governor Lael Brainard, one of the Fed’s more dovish members, who suggested the Fed could take a more aggressive approach with interest rates.
The unease extended into Wednesday when minutes of the last Federal Open Market Committee (FOMC) meeting were released, signaling a potentially faster pace in both interest rate hikes and the wind-down of the Fed’s balance sheet. Yields climbed steadily throughout the week as the bond market digested this new information. Particularly hard hit were high valuation stocks, as reflected in the 4% drop in the Nasdaq.
After raising the federal funds rate by 0.25% last month, the minutes from the March FOMC meeting made it clear the Fed is serious about fighting inflation with higher interest rates.
Fed officials indicated they might have hiked rates by a half percentage point in March had it not been for the uncertainty created by the invasion of Ukraine. Multiple Fed officials suggested that future rate hikes may reach 0.5%. Fed officials also discussed allowing up to a $95 billion monthly run off the Fed’s balance sheet, a faster pace than the market expected.4
Growth stocks get punished when interest rates rise, so all investors willing to make tactical adjustments should be favoring Value-oriented funds for the duration of this cycle. Those who followed this advice when first offered at the beginning of the year have done better than they would have otherwise.
This Week: Key Economic Data
Tuesday: Consumer Price Index (CPI).
Wednesday: Producer Price Index (PPI).
Thursday: Jobless Claims. Retail Sales. Consumer Sentiment.
Friday: Industrial Production.
Source: Econoday, April 8, 2022
This Week: Companies Reporting Earnings
Tuesday: CarMax, Inc. (KMX), Albertsons Companies, Inc. (ACI).
Wednesday: JPMorgan Chase & Co. (JPM), Delta Air Lines, Inc. (DAL), BlackRock, Inc. (BLK).
Thursday: UnitedHealth Group (UNH), The Goldman Sachs Group, Inc. (GS), Wells Fargo & Co. (WFC), Morgan Stanley (MS), The PNC Financial Services Group, Inc. (PNC).
Source: Zacks, April 8, 2022
"It has always seemed strange to me that in our endless discussions about education so little stress is laid on the pleasure of becoming an educated person, the enormous interest it adds to life."
– Edith Hamilton
Beware of Phishing Scams
A phishing scam is when someone pretends to be a trusted source, such as a bank, tax preparer, or credit card company, to access your personal information.
To avoid falling victim to a phishing scam, here are some recommendations from the IRS:
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov5
What’s the Deal With Downward Dog?
Even if you’ve never set foot on a yoga mat, you’ve probably heard of one of the most popular poses called Downward Dog.
The pose is so popular because it has many benefits, such as increased flexibility and spinal strength. In yoga, it’s a resting posture to let your muscles lengthen and straighten. It can help stretch your back, neck, hamstrings, and calves. You can sit in the pose without moving (a static hold) or “walk the dog,” which includes pushing your heels toward the ground to stretch out your calves.
If you’re new to downward dog, practice proper form by bending your knees and focusing on lengthening your back and arms. Ideally, your body should be in an inverted “V” shape. Eventually, you may be able to straighten your legs and have your heels touch the floor!
Tip adapted from Do You6
When you take away the whole from this, you still have some leftover. What is it?
Last week’s riddle: What do a shark, a zipper, and a comb all have in common? Answer: They all have teeth.
Female Kingfisher perched upon a moss-covered branch, United Kingdom
Footnotes and Sources
2. The Wall Street Journal, April 8, 2022
3. The Wall Street Journal, April 8, 2022
4. CNBC, April 6, 2022
5. IRS.gov, August 26, 2021
6. DoYou.com, September 30, 2021
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Weekly Market Insights: Fed Signals More Aggressive Action on Interest Rates
April 12, 2022