A Fed Pause May Be Closer Than You Think The Federal Reserve is back in action. The central bank raised interest rates by 25 basis points (0.25%) at its meeting this afternoon – which is what the market had been pricing in. So let's not waste any time and dive straight into the ramifications... Headline No. 1: The Fed raised rates to 5%. McCall's Call: Today's policy meeting was important. Inflation is still above the Fed's 2% target – which makes the case for more rate hikes. But up until this point, these increases have pushed bond prices lower. And that's a key factor in the failures of Silicon Valley Bank and Signature Bank (SBNY). So it's no surprise that all eyes were on the Fed. The market had been pricing in another 50-basis-point (0.5%) hike after Fed Chairman Jerome Powell's testimony before Congress earlier this month. But with the recent stress on the banking sector, expectations had come down to a 25-basis-point increase. And there was a slight chance of no hike at all. As expected, the Fed delivered a 25-basis-point hike to a range of 4.75% to 5%. As is often the case on Fed days, stocks were volatile after the release of the Fed's statement at 2 p.m. Eastern time. And the volatility increased after Powell began his press conference 30 minutes later – with the S&P 500 quickly testing its lows of the day around 3,990. But Powell didn't say anything new. He just reiterated that inflation is too high and said that getting it to the 2% target will be a bumpy road. To me, that number is totally archaic and arbitrary. I believe that once inflation is below 3%, there should no longer be any consideration of more rate hikes. He did highlight that the Fed doesn't currently see "ongoing" interest-rate hikes, though. Instead, Powell indicated that the economy may need some tightening. And those comments sent stocks soaring. Recommended Link: | Marc Chaikin Predicted the Recent Bank Run, and You'll Be Surprised by What He Says Comes Next On March 28, Wall Street legend Marc Chaikin is stepping forward to show you the ONE thing he believes you need to do this year to be on the right side of history. He used the same idea to make huge profits for his clients in the 1970s – a period much like today. Now, he says you could use it to make bigger gains with his Power Gauge than anything he has ever shared before. See the details and a free recommendation here. | |
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| Beyond the headline rate hike, the Fed's summary of economic projections showed that the central bank sees interest rates at about 5.1% at the end of 2023. That means we may only see one more hike before the "pause" investors have been waiting for. Of course, these projections could be way off. After all, the Fed didn't see itself first hiking interest rates until this year... and then hiked them seven times to 4.5% by the end of 2022. Powell's press conference dragged on with some ridiculous questions from the media. Meanwhile, the market gave back its gains and quickly plummeted to daily lows. But the selling didn't last... When investors digested the possibility of the Fed soon pausing, stocks once again rallied – although they still finished the day lower. I expect this daily volatility will continue through the rest of this week – and possibly even until we get a better picture of what the next Fed meeting on May 3 will bring. For now, though, it looks like the Fed is getting close to hitting the peak in this rate-hike cycle. And that's exactly what investors wanted to hear. But as always, things can change quickly. Headline No. 2: Volkswagen (VWAGY) will invest nearly $200 billion in the electric-vehicle ("EV") space. McCall's Call: The vehicle manufacturer announced the five-year investment at its annual media conference last Tuesday and said that about two-thirds of those funds will be directed to "electrification and digitalization" efforts. That's a major investment, even for Volkswagen – which brought in sales of $303 billion in 2022. And it simply confirms that it's going all in on EVs. Last year, EVs accounted for about 7% of Volkswagen's U.S. sales. But the company plans to push that figure to 55% – in North and South America – by 2030. So the massive investment makes sense. Without it, it would be nearly impossible to achieve such a goal. To meet its sales targets, Volkswagen will launch a lower-priced EV (sub-$27,000) by 2025. And it plans to offer more than 25 new EV models by the end of the decade. So expect to see a lot more Volkswagen EVs on the roads in the coming years. Plus, the firm is investing $2 billion in a new facility in South Carolina to build out its Scout Motors brand. This business line will feature an electric SUV and pickup truck that are expected to hit the market in 2026. Check out some of the renderings of these new EVs below... The automotive industry is changing quickly. And some of the largest automakers in the world are investing huge sums of money to stay ahead of the trend and back EVs. This is just the latest sign that electrification is gaining more mainstream adoption. Plenty of investment opportunities are ahead for long-term investors. My subscribers have already started building exposure... Have you? Here's to the future, Matt McCall Editor, Daily Insight March 22, 2023 Did You Miss My Latest Podcast? I've worked in the stock market for more than 20 years. And in that time, I've learned how much headlines matter. They sway investors' decisions – oftentimes in the wrong direction. So on this episode of Making Money With Matt McCall, I ignore the headlines and instead focus on what the charts and data are telling us. I highlight how this difference applies to the Consumer Price Index in particular. Most of the largest components that make up the inflation number are in a clear downtrend. But the catchy headlines would make you think otherwise. Then, I also discuss some of the best-performing assets in the midst of the ongoing banking crisis. |