For years, the adage “Don’t fight the Fed” meant only one thing: buy stocks. Now, legions of newbie investors who’ve never had to face inflation before are learning it can mean something else, too.
Battered for months by hawkish pronouncements by Jerome Powell, a man investors once considered their staunchest ally, the S&P 500 finished Monday more than 20% below its last record close, ending a two-year bull run that was among the most powerful ever recorded.
That Powell’s Fed should end up being the selloff’s star villain is bitter medicine for people who thought they had the market figured out. A booming economy, strong earnings estimates and still-flush consumers weren’t enough for stocks bulls to overcome red-hot inflation and a Fed chair hellbent on tamping it down.
The drop has been brutal for freshly christened equity enthusiasts once armed with government stimulus checks and urged to bet them long, often by online impresarios and other new-wave advice givers. Turns out, investing remains risky business, particularly when central bankers change course.
“The Fed put is a wing and a prayer at this point,” Victoria Greene, chief investment officer at G Squared Private Wealth, said by phone. “Investors should prepare for more pain.”
The S&P 500 fell 3.9% Monday after a ninth weekly decline in 10, becoming the latest benchmark to endure a drop of at least 20%. The Russell 2000 of small-caps entered a bear market in January, while the tech-heavy Nasdaq 100 did so two months later.
The decline makes Jan. 3 the end to what was in many aspects an unprecedented bull market for the S&P 500. At 651 days from its start March 23, 2020, this one was the shortest on record. Yet what it lacked in duration, it made up for in velocity. Its 53% annualized gains over the …read more
Source:: Time – Business