The Fed is not the stock market’s friend right now: Morning Brief

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Tuesday, September 20, 2022

Today’s newsletter is by Sam Ro, the author of TKer.co. Follow him on Twitter at @SamRo.

One of the Federal Reserve’s most telling statements about markets came from Chair Jerome Powell on June 15 when the central bank announced its biggest rate hike since 1994:

“Over the course of this year, financial markets have responded and have generally shown that they understand the path we’re laying out.”

When Powell said that, the S&P 500 had already fallen by more than 20% from its Jan. 4 high.

In other words, Powell all but confirmed that the 2022 market rout was exactly what he and his colleagues wanted.

If that wasn’t clear enough, Minneapolis Fed President Neel Kashkari echoed that sentiment on Aug. 29 when he said he was “happy” to see the stock market fall. That came after Powell reiterated his commitment to fight inflation — even if it meant “some pain to households and businesses.”

By the way, this isn’t the first time Powell used “pain” to describe what it might take to bring down inflation. At a Wall Street Journal event on May 17, he said: “There could be some pain involved in restoring price stability.”

To recap, inflation has been persistently high. To get prices under control, the Fed believes demand has to cool in the economy. In order to get…