Transcript:
Tom Vaughan:
Hello everybody, welcome to Monday, the S&P 500 was down about .9% today, and kind of light volume today. And mainly because the market I think is going to be waiting to see what happens this week, with the Federal Reserve meeting. They’re meeting on Tuesday and Wednesday, probably come out on Wednesday and start speaking about some of the things that they’ve discussed. And you know, what they’ve decided. And the big thing is the notice that they gave during the congressional testimony, where instead of cutting back the bond purchase at $15 billion a month being done really in June, they might cut it back $30 billion a month being done at the end of March. So you know, how does that change? What did they talk about in terms of flexibility, those types of things? And then the other aspect is rate increases? Will we get any more visibility on those? The expectation right now is two to three rate increases, kind of the second half of next year. Do they say that they’re going to be more or less? Maybe they say nothing, I would think they probably won’t tackle that subject right now, they’re just going to talk about these bond purchases, what’s happening there.
So here’s how it’s gonna work. As far as I’m concerned, the market will respond to this and kind of a choppy manner, one way or another. But if the economy is going to do well, next year, and they start to cut back on these bonds at a faster rate, and they cut, you know, start doing interest rate increases at a faster rate, the stock market can still do well; you can still have decent rates of return in that environment. When you have a situation where the economy starts to do poorly, and they’re still you know, cutting back on these bond purchases quickly, and increasing rates at a faster rate, that creates a situation where the economy could slow down more than expected, and the market usually responds to that, very much like what we saw at the end of 2018.
So I will be very interested to see what they talked about in terms of flexibility. I think they’re still going to keep sort of an aggressive stance on, you know, trying to cut back on stimulus, just because we just had a big inflation number. And Chairman Powell still has to be confirmed through Congress. And so that gives him something to talk about, in terms of what he’s going to do to fight inflation. So, you know, we’ll have to wait and see how this plays out. But these are interesting times. I wouldn’t be too worried about what happens right now. Because again, that’s gonna be kind of light volume. Maybe we’ll see what happens, you know, Wednesday and beyond. So, I look forward to talking to you tomorrow. Thank you.