SFS Insights

• As expected, the Federal Open Market Committee (FOMC) increased the fed funds rate by 50 basis points and made upward revisions to both inflation forecasts and interest rate forecasts in the next few years. The target range is now 4.25–4.50%. In the press conference, Chairman Powell focused on the imbalances in the labor market, indicating that the job market is the linchpin for economic growth in the coming year.

•  While Powell wouldn’t commit to the size of the next hike that will likely come early February, he suggested that the Fed has now moved to a stage where smaller hikes look appropriate as they close in on the terminal rate, which is the level at which the Fed is expected to stop raising interest rates.

•  Finally, Powell was asked directly if a recession in 2023 would cause the Fed to start easing policy sooner, to which he stated that they are tasked with promoting maximum employment and price stability (inflation). The employment market is running hot, while inflation is well above the Fed’s target. In other words, the Fed is comfortable continuing to raise rates even as unemployment rises, at least modestly.

• Remember, stocks have tended to produce solid gains after hiking cycles end. The average one-year gain for the S&P 500 Index after the last Fed rate hike is 10%, excluding dividends.

(Source: LPL Research)

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Robert Schermerhorn, CFP® 

Jamie Usas, CFP®

Operations Manager

Amanda Friedman

Wealth Consultant

Andrew Chapman, CFP®

Operations Research Associate

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