The Shoe Finally Dropped

For weeks now, investors have been in near hysteria imagining crushing Fed policy leading to a recession. Now that the Federal Reserve raised the fed funds rate by one-half of one percent and signaled that steeper rises are not being considered, the market rallied in relief. Other observations from the Chairman’s comments:

1. Further increases would be measured and data dependent
2. Policy is not on a preordained path
3. There is no predetermined endpoint for interest rate levels
4. The Fed hopes to engineer a soft landing for the economy
5. The economy remains strong and can absorb the withdrawal of monetary accommodation

First quarter business earnings have been good. Most firms commenting on the outlook of their own businesses have expressed confidence and optimism. Of course, there are always a few firms that run into difficulties. Most of these are because of issues specific to their business models and not because of the general economic environment. The conclusion the Bull and his partners have drawn is that staying steady and maintaining commitment to our process is warranted.

The Lonely Bull