Transcript:
Tom Vaughan:
Hello, everybody, welcome to Wednesday, the S&P 500 was up 2.24%. Today, second green shirt day in a row, very powerful Federal Reserve came out today said that they’re going to raise point, one quarter of a point on the interest rates. And they released their dotplot, which is kind of their guesstimate on how many points they think they might have to do for the rest of the year, which is not binding, but just somewhat interesting. And they said that maybe six more increases total of seven. That’s what the market was thinking was probably going to happen. So I think the market like that, I also believe the market likes the fact that the Fed is getting more in line on looking at inflation as the bigger threat. Because that’s certainly been what the market participants have been looking at. So having them get a little bit more aggressive, at least in their thought process of raising rates, I think has been well received.
The other part that’s interesting those obviously, it’s hard to tell how many rate increases you’re going to have in an environment where China’s locking down right now with COVID in this Ukraine situation, but there’s still some flexibility, they can meet every time and try to decide how much they want to raise rates. depending on what’s going on. Did they did mention they felt the economy’s quite strong could handle these rate increases. I thought that was important. One of the things that came out today was a study going back 70 years, looking at when the Federal Reserve raises rates for the first time, how long does it usually take before we have a recession? We don’t always have a recession. But how long does it take, if we do have one, the average is three years from the first. So that would be March of 2025. And theoretically, would be the start of the average recession after a first rate increase. The shortest period of time is 11 months from 1981. And the longest period of time was 84 months later.
I think one of the things that’s happening with this market right now is there may be a lot of correlations drawn with 1981. And we’re seeing a lot of talk about possible recessions happening in the very short term end of this year, beginning of next year, really within this 11 month term. Because that’s the timeframe, we had high inflation like we have now. And the Federal Reserve had to come in and really stamp on that. And in so doing, you know, knock down the economy summon such too, and that brought on recession a lot faster. This market is a lot different than 1981, the economy’s really strong. So that’s an important component of if you look back to 1981, you know, we didn’t have a pandemic, we didn’t have trillions of dollars that came out of stimulus, we didn’t have supply chain issues, to this degree, that are really hampering the, you know, supply of goods, we because the pandemic has happened, we’ve had the scenario where More money’s been going into goods and services, for example, people are traveling as much. And when that happens, you end up with more money chasing fewer things, and the price goes up faster. If we can get back to a situation where you know, get a more even spread of our monies, you know, as a country, inflation could drop, at least in that regard. So just from that standpoint, none of these were in the 1981 scenario that are here. And I could go on and on. There’s a lot of differences, because of the pandemic scenario that we’re in right now. And the Re-opening and all those different types of things. So I caution people from feeling that there would be a recession in immediate term here, the market seems to be, you know, factoring that in. And that’s partly why we’ve come down here some might happen suddenly watch for, I just would be really surprised because this is such a different situation.
I still think it would take an awful lot to turn this economy down from where it is. Now, personally, when we just had 7% gross domestic product growth for the fourth quarter, we have 11 point something million open jobs. Those are not recessionary signs. To me personally. They’re partly why we’re causing inflation. Because of this kind of hot growth. We did see retail sales come in a little bit lower today than expected. And so that’s something to watch for. We’ll see how that plays out. But overall, fantastic market saw the semiconductors make over 5%. Again, today, the SOS x index that we’ve been accumulating in these dips. We saw Microsoft and Apple make well north of 2%. Today also. So again, the money’s running into these growth arenas, just like it did yesterday, just like it did last Wednesday. I’ve been saying all along that that’s what we should be watching for where does the money go on the updates. So two updates in a row, very powerful, very, something really to look forward to hopefully this creates some stability for the market going forward. So I look forward to talking to you tomorrow. Thank you very much.