This leaves us up 13% on the year, and with another 4% climb to regain the October all-time highs.
The Fed meets this week. With a relatively light data and news week, the Fed will get plenty of attention. But remember, we know exactly where they stand. They want to maintain confidence in the economy. And they know the stock market is an important contributor (and can be a dangerous detractor) to confidence. They need stocks higher.
That’s why on January 4th, the Fed responded to the plunging stock market by marching out the current and past two leaders of the Fed to tell us the “normalization phase” on interest rates was over (i.e. no more rate hikes).
And that’s why on March 10th (just a week ago), in response to a 4% one-day plunge in Chinese stocks and some loss of momentum in the U.S. stock market rebound, Powell followed the script of his predecessor Ben Bernanke, and spoke directly to the public through an exclusive 60 Minutes interview, to reassure the public that the economy was in good shape, and that the Fed was there to ensure stability. If you bought stocks after both interviews, you felt no pain and have been rewarded handsomely.
With the above chart in mind, below is the chart we looked at to start the year, as we discussed the potential for a V-shaped recovery following the Fed’s January 4th strategic pivot.