Excerpt: The Federal Reserve is all set to convene for its second meeting of the year on March 21 and 22. Market competitors are largely anticipating that central bankers will increase the benchmark federal fund which affects savings accounts, credit cards, and mortgages.
Following a rather unstable 2022, which is also being touted as the worst year for the stock market since 2008, the S&P 500 launched with a decent start, concluding at approximately six percent by the end of January. But the recovery lost its passion in February due to paranoia over interest rates staying high for a longer period of time. That’s why investors are closely monitoring the latest stock market news. The S&P 500, which is the standard index for US stocks in general, has witnessed an increase of barely 4% since the beginning of 2023 as of Tuesday.
History has proven that S&P 500 has presented its greatest hikes in the month of March, particularly in the second half. Moreover, average returns for the Dow Jones Industrial Average (another one of three major indexes used to quantify overall US stock proliferation) in March, are most likely better than those in February.
In the last century, the Dow had a positive return fifty-eight percent of the time in March. The frequency accelerated to 64% when looked at in the last 50 years.
The good news is that how the stocks performed in January or February doesn’t really affect their performance in March. Past performance of the stocks doesn’t have any promise on future returns, so while the market has slumped in 2022, it might not necessarily persist this year too.
Having said that, it still completely depends on the whims and fancies of the Federal Reserve and its upcoming direction on the interest rates. The Fed has been increasing rates to fight inflation since the beginning of 2022. On top of that is the announcement by Fed Chair Jerome Powell who has clarified that an interest rate hike is a definite possibility. The rate hike can suppress financial assets like stocks and bonds.
The Federal Reserve is all set to convene for its second meeting of the year on March 21 and 22. Market competitors are largely anticipating that central bankers will increase the benchmark federal fund prices by 25 basic points to a range of 4.75% to 5%. This rate has a large effect on savings accounts, credit cards, mortgages, and alternative kinds of loans.
The hot topic for discussion on Wall Street is the Fed’s terminal rate or the maximum rate that won’t witness any further hike. According to Rob Haworth, a senior investment strategist at the US Bank Wealth Management, the market in March is only working to guess the Fed terminal rate. While that is certain, investors will estimate the next steps that can be taken by the policymakers based on the economic report scheduled for release on 14th March.
Now, about the Do’s and Dont’s in an economy like this, how to steer clear of any unwanted trouble in March?
With uncertainty lurking in the background, the stock market will most likely be unstable as investors try to provide logic to what Fed plans to do. This will try to pull the market up and down and will be tough for independent investors who are trying to just make some extra bucks.
Financial advisors are suggesting holding a long-term approach to investing instead of experimenting with short-term market trends. The best action for a majority of investors would be to retain a varied portfolio that streamlines their goals and risk tolerance.
According to Haworth, investors should get ready for more of what’s already taken place this year, with the market jumping between gains and losses, one month after the other. Having said that, there remains some good news for market participants who are careful enough to invest presently, as the boost in interest rates will imply a higher return on savings in the meantime.