Wall Street bounces back amid possible slowdown in Fed tightening
The upswing in the US stock market has been confirmed. Wall Street has taken a slightly more precise direction since Friday after several weeks of ups and downs thanks to a possible slowdown in the Fed’s monetary policy tightening from December, according to an article in the Wall Street Journal.
Nick Timiraos, considered the Fed’s go-to source for revealing its monetary policy views to gauge market reaction, indicated that the Fed will raise interest rates another 75 basis points at the November meeting, but that she may consider a smaller increase at the December meeting.
The softening of the tone of some members of the Fed has also reinforced these expectations. San Francisco Fed President Mary Daly has indicated she believes the slower pace of rate hikes will help maintain market structure, while St. Louis Fed President James Bullard (FOMC vote) said he hoped the deflationary process would begin in 2023.
As at the start of the summer, Wall Street is therefore rising on the back of a possible short-term “pivot” from the Fed. Although this recovery may continue in the short term, especially for flow reasons, it should only be temporary. In fact, fundamentals continue to deteriorate and a recovery in the market would ease financial conditions, which would be counterproductive for the Fed in its fight against inflation. Powell could therefore tighten the tone, as he did after the summer recovery, at the next monetary policy meeting in early November if the market recovery continues.
S&P 500 (Turbo US 500) Daily Price Chart – Key Levels