Medicare Agent News: Tell Us Something We Didn't Know.

Wednesday, July 6, 2022

Tell Us Something We Didn't Know.

By Connor Smith | Wednesday, July 6

A Hawkish Rally. Stocks rallied on Wednesday after the release of minutes from the Federal Reserve's June meeting. The takeaways for investors were hawkish—but not unexpected.

The S&P 500 rose 0.4%, extending a recent rally to three trading days. The same is true for the Nasdaq Composite. The Dow Jones Industrial Average rose 0.2%, and has risen two of the past three days.

Members of the Federal Open Market Committee agreed that a rate hike of 0.5 percentage point or 0.75 percentage point would likely be needed in July. Barron's Lisa Beilfuss writes that though the minutes read hawkish, stocks rose as investors considered economic developments since the Fed met in mid-June. Lisa adds:

Investors already knew that the Fed is between a half-point and another three-quarter point hike for July. Fed Chairman Powell suggested the base-case is the former, though he hasn’t taken another 0.75-point increase off the table. Traders have priced in about a 90% chance of a 0.75-point increase in July, and the minutes should do nothing to change that expectation.

Where the question remains is what happens after July. On their face, the latest meeting minutes indicate the Fed will remain aggressive, with 0.5-percentage-point hikes the new 0.25-point moves and officials suggesting they will err on the side of overtightening.

Lisa notes that among the reasons for the June 0.75 percentage-point hike was the University of Michigan's 5-10 year inflation expectations gauge that appeared in its monthly consumer confidence report. The initial 3% to 3.3% figure was revised down to 3.1%, which is back within a range from the past year or so. She adds:

Markets have already shifted their focus from inflation to growth—and more so after the big June hike and ahead of a potentially similar increase this month. Unclear is when the Fed will shift its focus, and whether inflation will remain high even as growth falters. The June minutes don’t give any hints that officials are starting to waver. But things are moving fast, and the minutes are already three weeks old.

Still, investors will be watching the June consumer price index report on July 13 closely.