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INANE Market reaction to Interest Rates

As the world adjusts to the Ukrainian Invasion, the stock market was recovering and the Small-Mid Cap stocks were showing strong relative strength.  Until yesterday, when FED Chairman Jay Powell stated the obvious about raising the FED Funds Rate- “it is appropriate to be moving a little more quickly.”

In typical kneejerk reaction, the Markets closed out the week down significantly, NASDAQ ~3.85% & S&P 500 ~2.68%. 

My typical cynical response is:  So what?  The economy is no longer in an “emergency” situation and therefore, “normal” rates are justified.  The FED is just raising rates to catch up to where the Market already is.

As displayed in the below chart, the FED Funds Rate is significantly below the current 10 Year Treasury & 30 Year Mortgage.  Furthermore, the 10 & 30 are not at extreme levels, they’re at about a 20 year mid-range.  Something I would characterize as “healthy” not “scary”. 

Therefore, I remain cynically optimistic.

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