Friends
Everyone has been bellyaching that stocks haven’t moved (shown any volatility) for months-well, we got some movement today. Unfortunately for the bulls, the selloff in stocks today was triggered by hawkish comments by a Fed Governor this morning before the opening bell. Just when investors were getting comfortable that the Fed was unlikely to move on interest rates until December, today’s action shows that a possibility of a September rate hike wasn’t baked in and isn’t sitting well with market participants.
If I may digress for a moment, the Fed ended Quantitative Easing back in October of 2014. That didn’t crush the market, but it did take the wind out of its sails. Though QE was finished, interest rates were held at zero and long term rates remained low and had spurts were they went even lower. So the ending of QE didn’t kill stocks because interest rates were still miniscule and the TINA (there is no alternative) principle remained intact. Remember, in December of 2015 the Fed did raise rates ¼ of a percent and stocks sold off hard into early February of this year. Then, after much bluster, the Fed backed off on its prediction of 4 or 5 rate hikes for 2016, and stocks rallied as market participants expressed a sigh of relief. Well, here we are again possibly looking down the barrel of a coming rate hike(s) and market participants are freaking out again. Just an opinion, but it would take aggressive tightening by the Fed to move rates to a level that would challenge the long term benefits of stocks. The Fed is talking about a very deliberate and gradual pace of rate increases that would take years if it even comes to pass at all (and many have doubt that it will in our lifetime). So with that as our backdrop, back to today…
Stocks tumbled at the opening bell and continued downward throughout the trading session. By the close, the Dow Jones Industrial Average was down 394 points to finish the day at 18,085. The S&P 500 was down 53 points to close at 2,127. Gold was down $9 to trade at $1,332 per ounce, while oil was down $1.73 to trade at $45.92 per barrel WTI.
The September Fed meeting is coming in a week and a half, so we won’t have to wait long to see if there really will be a rate hike before the election. I am not saying that they won’t move, but let’s just say I want to see it to believe it.
This weekend marks the 15th anniversary of 9-11. I know I’ll never forget. Have a great weekend everyone.
