Powell Is Losing His Post-Meeting Stock Touch
Traders haven’t entirely lost their taste for “buying the dip,” but the rallies are becoming shorter, and that’s a positive development.
Losing some buy-the-dip mojo.
Photographer: Al Drago/Bloomberg
The stock rallies after Federal Reserve meetings are becoming shorter and shorter, a sign that a generation of US stock traders conditioned to “buy the dip” may be getting closer to comprehending the challenges facing the economy. That’s a precondition for the bear market to run its course, though it doesn’t necessarily mean it’s any closer to its end.
Stocks rallied Wednesday afternoon after the Federal Open Market Committee raised interest rates by 75 basis points, the most since 1994, a strange series of events taken at face value. Higher interest rates are kryptonite to the stock market, but ostensibly the rally reflected some relief after Fed Chair Jerome Powell suggested that jumbo-sized increases won’t become the norm.1 Certainly, there was also some tactical short-covering as speculators who made money on the pre-Fed-meeting selloff cashed in their chips.