The Nearly Ten-Year-Old US Bull Market Threw a Tantrum This Week as the Fed Held True to its Plans in the Weekly Market Update by Valeo Financial Advisors (December 22, 2018)
December 22, 2018    Disclosures    POSTED IN  InvestmentsEconomyMarketsInternationalEconomic

The nearly ten-year-old US bull market threw a tantrum this week as the Federal Reserve Open Market Committee held true to its plans to tighten rates. Wednesday’s conclusion of the FOMC’s two-day meeting brought news of a fourth and final rate hike this year, bringing the benchmark interest rate to a range of 2.25 – 2.50%. With a small nod to the fears of a slowdown, the Fed reduced the number of anticipated rate hikes in 2019 from three to two. Combined with a slightly softer Friday report from the Bureau of Economic Data (underscoring that the trade war might be taking a bit of a toll) and more political turmoil with General Mattis’s resignation and a government shutdown, it was hard to find good news. However, this type of periodic volatility is not unusual for equities and often brings opportunities for those who take a longer term view.

The Dow had its worst week since 2008, losing 6.8% (1655 points) while the S&P 500 lost 7%, its worst weekly performance in over seven years. The Nasdaq Composite flirted with bear market territory following Fed Chairman Powell’s comments, and as of close on Friday, is officially in a bear market. The index is 22% below its August peak. While still down for the week, international and emerging market stocks were less impacted by the chaos in the US markets. Bond funds generally had a strong week and were a safe haven as longer term rates fell to new and fresh lows – following the market’s fear versus the Fed’s path for the Fed Funds Rate (the only part of the curve it directly controls).

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