Wall Street rebounds amid possible slowdown in Fed tightening
The rebound of the American stock market is confirmed. Wall Street has been taking a slightly more precise direction since Friday after several weeks of ups and downs thanks to a possible slowdown in the Fed’s monetary tightening from December, according to an article in the Wall Street Journal.
Nick Timiraos, considered the Fed’s preferred source for disclosing his monetary policy views to gauge market reaction, indicated that the Fed will raise rates an additional 75 basis points at the November meeting, but that she might consider a smaller increase at the December meeting.
The moderation of the tone of some members of the Fed has also reinforced these expectations. San Francisco Fed President Mary Daly has indicated that she believes the slower pace of rate hikes will help preserve market structure while St. Louis Fed President James Bullard (voting of the FOMC), said he hoped the deflationary process would begin in 2023.
As at the start of the summer, Wall Street is therefore picking up on the backdrop of a possible short-term “pivot” by the Fed. Although this rebound may continue in the short term, notably for flow reasons, it should only be temporary. Indeed, the fundamentals continue to deteriorate and a market rebound would ease financial conditions, which would be counterproductive for the Fed in its fight against inflation. Powell could therefore toughen his tone, as he did after the summer rebound, at the next monetary policy meeting in early November, if the market rebound continues.
S&P 500 (Turbo US 500) daily price chart – key levels