“Baker, slow down!” I will never forget Mr. Hemphill, my driver’s ed teacher, yelling at me as he slammed the passenger side brake. I wasn’t slowing down fast enough for his comfort at the stop sign next to our county library.
Similarly, on November 3, the Federal Reserve announced at the end of its Open Market Committee meeting that it was going to begin hitting the brakes on the pace of the monthly amount of its bond purchases this month (quantitative easing). They aren’t slamming on the brakes completely but are beginning a gradual slowing of their asset purchases. The Fed has been purchasing $120 billion in Treasury and mortgage-backed bonds every month in an attempt to keep long-term interest rates low and keep the economy strong after the pandemic. It’s expected that they will be lowering their buying by $15 billion each month until they get to zero sometime in the summer of 2023 according to the Wall Street Journal.
Neither the Fed nor Chairman Powell said anything about a fed funds rate increase, but analysts at Charles Schwab expect rate hikes to begin late next year and there could be a total of 7 fed funds rate hikes by year end 2024.
Hopefully investors will like the Fed’s timing and will continue to ride a wave of solid returns.
According to Yahoo Finance the S&P 500 reversed September’s 5% loss and ended October with an all-time high. Corporate profits are strong and consumer sentiment seems strong too. Investors love November because it has been the best month for stocks on the S&P 500 dating back to 1980. Not every November is great, but I hope this one continues the positive trend.
It seems like Mr. Hemphill was always questioning my speed. He was also my baseball coach, and I don’t ever remember him giving me the signal to try to stretch a single into a double. Then again, I wasn’t known for foot speed.
Have a blessed week!
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