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Uncertainty Is The Enemy

Uncertainty Is The Enemy

Uncertainty is scary. Whether good or bad, once news is known investors can absorb, react, and adjust future actions accordingly.

Uncertainty, on the other hand, often creates anxiety or even panic. On November 2nd, the U.S. Federal Reserve (Fed) announced its fourth consecutive 0.75%, (75 basis point) increase in interest rates. While not great news, it was expected as evidenced by the CME’s FedWatch Tool which signaled that the Fed was highly likely to raise rates by 75 basis points. So, the Fed did exactly what was expected, and equity markets rallied immediately after the announcement.

Then, Chairman Jerome Powell spoke at a news conference and said it would be “very premature” to consider a pause in their rate hike strategy as they work to tame inflation. The S&P 500 Index quickly reversed lower and ended the day down -2.50%. While the use of the word “premature” may have seemed like a fairly benign choice of words, it reminded investors that the unknowns, as it relates to our economy, outweigh what we do know.

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This post appeared first on ETF Trends.