Yesterday at the FOMC press conference Fed Chairman Jay Powell said, “The question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive.”
Of course the real question to investors is, how high can rates go before something in the global economy breaks?
The Fed’s plan is to orchestrate a soft landing by creating just enough unemployment to curtail wage inflation. They’ll likely keep tightening until that goal is reached or until they unintentionally throw the economy into a deep recession.
For pragmatic patient investors the outcome will be the same- the opportunity to buy quality profitable companies at a discounted stock price.
My recommendation is to not get caught up in the speculation of where rates are headed. The Fed doesn’t know. They can’t predict the future any more accurately than anyone else. They’re simply reacting to economic realities. Note the below chart which illustrates how frequent and variable their “target” changes.
So for now, just patiently mark time. Wait for opportunities to present themselves.
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