Transcript:
Tom Vaughan:
Hello, everybody, welcome to Tuesday. The S&P 500 was up about a half a percent today, which is really good considering yesterday it was up 1.4%, and so we’re climbing back out of the little hole that was dug last last week. And really, again, it’s kind of the catalyst has to do with what’s happening with the Federal Reserve. Several different interviews with some of the Fed governors, but the chairman, Chairman Powell was testifying or having a meeting with Congress today, and essentially talked about the same things, they feel like, they need to keep the easy system in place with the bond purchases and the low interest rates, until they see some real strong recovery out of the labor market, which is what they’re not seeing, so far.
There’s been some recovery, it’s getting better, but it’s not where they want it to be. And so you know, behind the scenes, as what we saw last week, there’s been some conversations really recorded for the first time about the possibility of raising rates in 2023, and of course, the possibility of cutting back on some of those bond purchases. I think they’re doing the right thing, they’re kind of going back and forth, and we’re getting a mixed bag of things that were in the market and things that make the market feel better, and they’re keeping the market from getting too carried away one way or another sofa starts to fall out, you see him coming out talking about good things, and when it’s up a lot, you’ll see them coming out and talking about some of the things that they’re going to have to do.
And it is, it’s a tough job to try to figure out, how to get things back in terms of interest rates, and some of these, lowering some of these bond purchases, because once they start these things. Eventually if they keep doing them, you could end up with a higher inflationary environment, which you wouldn’t want, but obviously, if they cut them off too quickly, then we could kind of a slide backwards. And again, if the objective is to have sort of a higher unemployment situation, or what they call full employment, which is really usually around 3% to 4% unemployment, and right now we’re at around 6%, so it’s got a little ways to go, then you got to kind of find this middle ground, so to speak.
And it’s not easy, actually. These guys generally in the past, have, unfortunately, overdone, the rate increases. And so they’ll go after the economy, by trying to slow it down by raising rates, and then we end up the 2000 downturn, and the 2008 downturn. And the one thing I’ll say that’s different about this Federal Reserve that I’ve never seen before in my 35 years, is that they are going to try to do things a little bit differently: Let inflation run a little bit. They say it’s going to be temporary, we’ll see. But, they’re really looking to try to average 2% instead of kind of a maximum of 2%. And that, tight reign that they had before, really mostly caused what happened in 2000 and 2008, which is just astronomic pain across the world when these two things happen.
So, I think this process is better. I’d rather have the fear of a little bit of inflation in place, if we could maybe stave off some of these giant downturns personally, so, I think you know, that part’s okay. So, that was the real news today. Again, I know that the Federal Reserve is in everybody’s favorite thing, but that’s what’s you know, really driving the market right now. So, look forward to seeing what’s gonna happen tomorrow. Thank you very much.