1 Major Takeaway From FOMC You Need To Know

Well, another Fed meeting is in the books. Like all the prior meetings, there was elevated volatility and our portfolios took another hit. I had hoped to write an edition of the newsletter that went along the lines of, “how this Fed meeting could be unlike the prior meetings,” but the reality is… it was exactly like the rest.

What do I mean by that? Well two things in particular, the Fed’s actions and remarks, as well as market participants. First let’s talk about the market participants, particularly retail traders and investors.

In the days leading up to the meeting, there were murmurs on Twitter (TWTR), financial media, and on the sidewalk where people thought the Fed was going to do this or that. One example, the Fed is going to ease up after this rate hike or that this one could be for 50 basis points, instead of 75 basis points. While there were some remarks made by Powell that signaled at a coming change to monetary policy, that still remains to be seen. At the heart of it all these predictions, hope, which is not a strategy in trading or investing.

Then reality hit. The Fed kept on their hawkish crusade against inflation, hiking rates by another 75 bps. However, the most important part of today were the remarks made by Fed Chair Powell following the rate announcement.

In his remarks, Powell put to bed any hopes of the Fed taking their foot off the pedal… at least for the time being. He was careful to not forecast too far into the future, but instead focused on keeping the Fed’s message consistent. Their goal is to fight inflation by doing whatever it takes to bring it back in line with their target rate.

So what does that mean? In my opinion, it means “more pain” as Powell famously put it in a prior news conference, is likely on its way. Which seems obvious when you look at how the market closed today, well below where it opened.

There was plenty of hype going into the meeting, investors thinking some magic BULLet would be shot and the market would be sent soaring, but this prediction, this hope, was far from the reality. The reality is, lower or even stabilized rates, may not be coming all that soon. So we need to strategize based on what the market, as well as economic forces, are giving us. Not hope the market will confirm our bias one way or another.

This is just a long winded way of saying, stick to your guns and devise a plan so you do not fall victim to things like confirmation bias or falling into the “hope trap.” At the end of the day, the market is going to go where the market is going to go and doesn’t give a damn about where you want it to go.

If your plan is to keep buying the dips, then stick to your plan. If it’s to sell some stocks on a pop or rally, then do that. If you are going near another buy or sell order until you’re comfortable, there’s no harm in that either. Some of the biggest mistakes in trading or investing I have ever made have come off the back of other people’s opinions. That is where portfolios go to die.

What’s your approach to this reality? What strategies are you employing and which are you staying far away from? Let us know by emailing content@magnificommunities.com and have your insights share with the MPower community!

Today’s feature: Rates Are Continuing To Rise

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