Markets Are Fighting the Fed at Their Own Peril
The Federal Reserve remains more hawkish than investors thought and it’s a mistake to shrug that off. Plus, the upside risks in 2023.
It’s all in the body language.
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Investors aren’t supposed to fight the Fed. It’s one of the most constant aphorisms driven into the mind of any investor that they should never do it. But as 2022 comes to an end, it looks like the conflict remains intense. Jerome Powell and his colleagues at the Federal Reserve told us that they were more hawkish than people realized, and that the projected course of interest rates should be adjusted upwards. The market responded by adjusting its estimates of rates slightly downwards. What gives?