FOMC Meetings (US FED) and Their Effect on the Stock Market

FOMC Meetings and Their Affect on the Stock Market

What are FOMC Meetings

The Federal Open Market Committee (FOMC) meets 8 times a year and discusses the economic outlook as well as any changes/potential future changes to their monetary policy. These meetings take a look at the economy as a whole and are followed by a press conference where federal chair Jerome Powell is open to the media’s questions.

Extreme Volatility

Most traders choose to sit on the sidelines and not engage in any trades before, during, or after the FOMC meeting due to the extreme volatility taking place. 

The smallest things during this meeting strongly influence the market in either direction; an announcement of an interest rate increase, monetary policy change, or even Fed chair Jerome Powell’s choice of wording and tone in response to questions have sharp and quick effects on market direction. 

Some traders, however, enjoy the volatility where there is a high risk but high reward set in place. 

The Focus of Recent Meetings

In recent meetings, there has been a key focus on reducing inflation. This is generally done by increasing the federal fund’s interest rate which in turn increases the cost of borrowing money and is intended to reduce inflation. 

There has been a long-standing figure for what the Fed aims to keep inflation and this is 2%. Recently, in CPI (consumer price index) reports that are available to the public inflation has come as high as 9.1% (June report). This is why the Fed has been active and aggressive in increasing its rate many times this year.

July Meeting Takeaways

The most recent meeting occurred on July 26th and 27th when another 75 basis point hike was announced. The tone of Fed Chair Jerome Powell seemed to be more passive and reassuring than aggressive and “doom and gloom” per se. Here are our 10 key takeaways from the meeting: 

  1. Bringing inflation down to  2% goal is the FED’s goal.
  2. They would like to bring this inflation down while still sustaining a strong labor market (not causing massive unemployment).
  3. Continue quantitative tightening (reduction of the balance sheet) to also tame inflation.
  4. Wage growth has still been growing and employment has been good still.
  5. Looking at a moderately restrictive policy hence the 75 basis point hike instead of 100. However, will deploy a more aggressive policy if inflation gets out of hand.
  6. Unemployment is at a 50-year low.
  7. Need supply cycle to catch up and match up with demand.
  8. Need to taper demand to allow supply to catch up.
  9. Powell highlighted that “we are not currently in a recession.” Many economists have an opposing view.
  10. After this rate increase, the federal funds rate is at 2.5% and they are looking to increase it to between 3.25-3.5% by end of the year. This number could however be higher and revised based on metrics coming in over the coming months.

This fall on November 12th we will have the Wealth Hacker Conference where there will be a Stock Hacker Academy course presented that can potentially help you learn how to cash flow with stock hacking the same way me and Erwin have been able to!

And don’t forget constant learning supersedes any losing moments, here’s to continued education!

Your Fellow Stock Hackers

Cherry & Erwin

What do I do with this information?

Continue to educate yourself by joining our mailing list and receiving free content along the way.  For those who would like to take action, we have premium (paid) products and services.   With the stock market and the general economy at crossroads, it is time to get educated so that you are ready for the next opportunity and/or mitigate against the next potential dip in the stock market. 

That’s all for now.

Happy trading and investing,

Your fellow Stock Hackers,

🍒Cherry & Erwin
P.S. The market dropped almost 20% between January and June this year. Many are worried it could keep going. Will the market crash? What are you supposed to do if it does crash? We unpack all of these questions in our latest FREE report, “What to do if the Market Crashes in 2022.” Download your free copy now!

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