Fed Hikes, Stocks Initially Slump; Powell Speaks, Stocks Rally; What's Next?

Kevin Wilbur profile picture
Kevin Wilbur
133 Followers

Summary

  • High volatility has defined the stock market during 2022's first quarter correction.
  • Wednesday, the market dropped significantly on 'sell the news' as The Fed hiked rates for the first time in four years. Then the market reversed dramatically as Chairman Powell speaks.
  • The market rallied nearly halfway back to its early January highs this week, and long-term fundamental investors are encouraged!
  • What's next for stocks? Higher highs or lower lows?

Wall street sign in New York with New York Stock Exchange background

naphtalina/iStock via Getty Images

This past week provided the kind of market volatility which traders, usually, 'can only dream of;' and which, after a very difficult quarter, longer-term fundamentals-based investors, it would seem, 'would surely welcome!'

The Dow Jones 30 Composite Index posted a nearly 1900 point trading range, from early Tuesday morning's bottom to Friday afternoon's closing top.

The Nasdaq 100, actually posted its deepest lows on Tuesday since the beginning of the broad market's highs the first week of January, and its own highs in November. And in four days this week reclaimed 38% of its losses from the past 7 months.

And since Tuesday's early morning lows, the S&P500 SPY ETF has rallied from $413.70 to $445.60, and is now just 'a hair short' of having rallied halfway back to its own January highs!

Active advanced short-term technical analysis-based traders are reported to have been loving this quarter's extreme volatility; but, what of average longer-term fundamentals-based investors? Many financial experts suggest that most longer-term investors in the stock market will not be happy with their next, and soon coming, portfolio quarterly reports. So, what does come next for the stock market and investors? And especially now that the market is 'halfway back?'

DJX, DOW JONES INDUSTRIAL AVERAGE INDEX, Y2022, Q1 DAILY CANDLES

DJX 2022 Q1 DAILY CANDLES

MDPP Precision Pivots Global Markets Laboratory

DJX, Y2022, WEEKS 10&11 HIGHLIGHTS, ZOOMED, 10 MINUTE CANDLES

DJX Y2022 W10/11 ZOOM 10MINC

MDPP Precision Pivots Global Markets Laboratory

The current macroeconomic environment for stocks may be viewed as presenting considerable potential headwinds: historic and lingering Covid, historic inflation, historic European war (and its potentially emerging global geo-economic realignments), and the outlook of a potentially significant Fed rate hike regimen, spanning the entire year, while coming off of historic interest rate lows.

When the Fed announced its quarter-point rate hike Wednesday afternoon, the stock market, which had been up over 400 Dow points, slumped into fully negative territory in just 35 minutes! But then, as Fed Chairman Powell was making his statement, and in it began citing the strength of wages, and the strength of the US consumer, the market turned.

In one amazing week, and the right kind of 'FedSpeak,' significant enthusiasm appears to have returned to the broad stock market! And some financial analysts and reporters who have been 'on the fence' have started to join a seeming 'bandwagon' of believers that at least a possible short-term market bottom had been 'put in', and possibly even a bottom for the year. Now, many investors seem to be asking, "which 'Fed' is it that I'm not supposed to fight": the 'coming rate hike regiment', or Fed Chairman Powell's amazing 'market direction turning' FedSpeak?"

High gas prices, high food prices, high rental prices, high home prices, tight labor supply, potentially upward wage prices all seem to remain in the mix. And this is in the forefront, domestically, of a competitive Congressional 'coattails' election year, too. Treasury bonds and inflation hedging metals continue to move in their positive "alternative to equities' momentums. And supply chain issues (not just labor supply) also continue to abound.

In our view, with the exception of war in Europe, there actually was nothing new presented within this month's antecedent macroeconomic news. And historically, on balance, when interest rates increase, that has actually been good for stocks. With the Fed Chairman emphasizing what might be viewed as 'wage strength' and 'consumer strength', the stock market may be further undergirded.

However, we tend to view portfolio 'protection' as paramount to successful long-term investing, especially with regard to stock market price level occurrences in that typical fourth 'off-year' within the Presidential Cycle, which, in 2022, we are now in. So our bias is to remain fundamentally cautious this year; however, positioning in concert with the stock market's response to FedSpeak from the Fed Chair during this important time, while continuing to 'ladder in,' along with hedge insurance protections.

In the last 16 years (the maturity cycle), we believe Ben Bernanke, Janet Yellen, and now Jerome Powell, as Fed Chairs, have done excellent jobs in their roles, and done so while it always remained so very easy to 'bash' the sitting Fed Chair as the current trials being faced at the particular time during any year resounded.

So, regarding what's next, we are remaining particularly observant of, and attenuated to market price dynamics, and especially to Chair-led FedSpeak observably and directionally impacting it, along with present macroeconomic fundamentals, especially domestic employment and wages, household disposable income and consumer spending, and corporate inventory builds and earnings. We believe we received a fairly positive report from the Fed Chairman Powell this past week, all things considered. And, while our general bias remains cautious, and, 'Don't Fight The Fed' remains in force in our view, we also recognize stocks, on balance, historically perform positively longer-term in response to 'Fed tightening.' So we will continue to maintain, and further 'ladder in,' along with added advanced hedging protections.

And, with the rest of the world, we will proceed with our investing, while also keeping a close eye on global affairs, in caveat.

In the meantime, we will also try to help, as we can, those suffering so direly from the untowardness and unspeak-abilities of war.

Thank you. And Godspeed in your long-term investing and current trading.

This article was written by

Kevin Wilbur profile picture
133 Followers
Kevin John Bradford Wilbur is the President and Founder of ProtectVEST and AdvanceVEST By EchoVectorVEST MDPP PRECISION PIVOTS. He is also the Chief Architect of the Motion Dynamics and Precision Pivots Forecast Model and Alert Paradigm, and the Senior Developer of the ProtectVEST and AdvanceVEST Active Advanced Position and Risk Management Trade Technology, and Active Advanced Position and Risk Management Capital Gain Optimization Methodology.https://advancevest.com/kevinjohnbradfordwilbur.htmlKevin is a prize-winning Economist (Governor's Fellow) and Financial Physicist with an over 35 year span of experience and awards in Academics, Research, Management, Practice and Trade. Kevin has specialized experience in the Major Market Indexes, Commodities, ETFs, and in derivatives and the derivatives markets. Kevin received his Masters Degree in Economics from George Mason University, where he also served as the President of the Theta Chapter of Omicron Delta Epsilon, The International Economic Honorary. At GMU, Kevin was awarded The Virginia Graduate Scholarship, and also served prestigiously as a Governor's Fellow in Economics. Kevin also attended The USDA Graduate School, where also excelling, he focused on Commodity Price and Program Management Techniques in service to US National Interests. With economic security clearances at USDA, Kevin served within the Agricultural Policy Analysis Group at ERS (Economic Research Service) and within Program Administration Divisions at ASCS (Agricultural Stabilization and Conservation Service). He also served to support CCC (Commodity Credit Corporation) economic forecasts, CCC commodity price discovery and stabilization efforts, and CCC contract awards. While at USDA, Kevin was awarded the Federal Certificate of Merit Service Award for his contributions and service to the National Interest at a time of peak need. Kevin has served as Founder, President, Senior Market Analyst and Senior Market Strategist of ProtectVEST And AdvanceVEST By EchoVectorVEST, Divisions of Motion Dynamics and Precision Pivots, Bradford Market Research and Analytics, KBW Enterprises.* In forecasting and anticipating the market crash of 2008 and 2009 beforehand in 2007, Kevin enabled prepared parties the prevention of significant equity value loss those years. And his subsequent market forecast of the following March 2009 major market lows proved equally as 'valuable.' (Kevin forecasted and identified the March 10, 2009, 're-entry point' to the day). In 2010 Kevin went on to successfully forecast and identify the subsequent intermediate-term market top of mid-April enabling high market price level insurance locks. He also forecasted and identified the early September re-entry point later that year, for the re-introduction of powerfully productive full net long and double-long market exposures. In 2011 Kevin's market forecasts continued with truly remarkable and outstanding results, and his market-timed Alerts guided to an amazing 130 percent annual increase on a Dow 30 Industrials Composite Average Price Equivalency Basis that year! In 2012 Kevin's market forecasts were even more impressive, with the MDPP Model forecasting over triple the effective returns of 2011! Kevin made and issued pivotal forecasts for the Major Market Large Cap Stock Indexes, the Gold Metals Markets, and the North American Crude Oil Markets (his three select and primary foci) with further outstanding results and success. Interest in Kevin's forecasts grew significantly the following years! And during the bull market run through 2019, Kevin continued with his exceptionally impressive pace of forecast results!  And, remarkably, in 2020 on February 2ND Kevin warned of the Chinese Equities Market collapse! Then, on February 18TH 2020, Kevin called for the application of FULL price level hedge insurance on US Equities Market exposures by Wednesday February 19TH of its 2020 peak week (again enabling prepared parties the prevention of significant equity value loss into latter March 2020)!  Then in March of 2020 Kevin forecasted the historic near-term market bottom, issuing a further Precision Pivot OTAPS re-entry price point of $287.75 on the US S$P500 SPY ETF as a proxy point indicator, for Monday March 24TH 2020! (With the upsloping "Wilbur Winged W Formation" financial technical analysis price bottom confirmation pattern currently underway!)  ​(See https://wilburwingedwchartpattern.blogspot.com/)This outstanding pace and reach of Kevin's valuable and lauded commentary and analysis and his remarkable record of timely and effective market forecasts and alerts, issued globally for the benefit and interests of market scholars, market professionals, and active market enthusiasts alike, continues to this day!See http://www.echovectorvest.com/services.html OUR RECORD: "Forecasting Prowess And Trade Management Technology Consistent With More Than Doubling The Portfolio Position Value Of The DIA ETF (Dow 30 Industrials) From Mid-2007 to 2009 (Including The 2008-2009 Recessionary Period)! More Than Doubling Again From Early 2009 Through 2010! And More Than Doubling Again In 2011! And More Than Tripling Again In 2012! And Then More Than Tripling Again In 2013! And Then More Than Tripling Again In 2014!  And Then More Than Tripling Again In Each Year From 2015 To 2019! And In 2020 More Than Tripling The Entire Gains Of The SP500, That Occurred From October 2016 To February 2020! And In 2021 More Than Tripling Again!! FURTHER BIO Kevin attended the College of William and Mary as an undergraduate, earning his Double-Major. As a Senior, he was selected by William and Mary (along with one other undergraduate) to enjoy the privilege of attending class his last semester additionally at the Marshall-Wythe School of Law. Kevin grew up and attended High School in Fairfax County, VA. His formative High School achievements and interests also included a plethora of honor societies, clubs, organizations, and awards. At Commencement Kevin was awarded three (for the first time in the history of his high school) different Senior Graduating Day Highest Honor Awards and Plaques: in Service, in Citizenship, and in Social Studies. Kevin was also a Key Club President, a Letterman and District Medal Event Winner in Track and Field, and also earned the Eagle Scout Award. Kevin remains a member of NESA (The National Eagle Scout Association) to this day. Kevin is married, and currently lives with his beloved wife and their three children in sunny Florida, USA. *With ProtectVEST by EchoVectorVEST, Kevin has led the design and engineering of an applied methodology seeking to enhance major market exposed portfolio value security and overall portfolio value performance and return through the application and utilization of specialized derivatives as 'portfolio value insurancing' hedges when also combined with the power of the Motion Dynamics and Precision Pivots Forecast Model and Alert Paradigm and the ProtectVEST and AdvanceVEST By EchoVectorVEST Active Advanced Risk Management Trade Technology and Active Advanced Management Position Value Optimization Method. AMERICAN ECONOMIC ASSOCIATION MEMBER OMICRON DELTA EPSILON, THE INTERNATIONAL ECONOMICS HONOR SOCIETY, PAST PRESIDENT THETA CHAPTER MARKET TECHNICIANS ASSOCIATION AFFILIATE MEMBERSHIP AUTHOR/CONTRIBUTOR OF ARTICLES PUBLISHED AND FEATURED IN NASDAQ.COM "Official Site Of The Nasdaq Stock Market" CNBC ONLINE "First In Business Worldwide" MARKETWATCH "Stock Market Quotes, Business News, Financial News" MSN MONEY "Investing" YAHOO FINANCE "Business Finance, Stock Market, Quotes, News" SEEKING ALPHA "Stock Market News and Financial News" BULLFAX "Market News and Analysis" STREETINSIDER "If You're Not Inside You're Outside" BIZWAYS "Investment Opportunities And Industry News" FINANCIAL VISUALIZATIONS "Financial Research, Analysis, and Visualization" FINANCE ROUNDTABLE "Market Forecasts and Finance", UNC Chapel Hill ECHOVECTORVEST "Advanced Educational Stock Market Analysis, Forecast, and Alert Website, and Technical Analysis Methodology." 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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Short position through short-selling of the stock, or purchase of put options or similar derivatives in SPY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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