Today’s announcement of the US Federal Reserve’s decision to increase policy rates by 25 basis points was met with a violent market reaction. Up until the announcement at 2 pm EST, major indexes in the US had solid gains. However, in the hour that followed, the market shed all gains and turned markedly negative. The intraday price decline in the S&P 500 — highlighted on the chart below — surpassed 3.7% which is nearly double the intraday price moves we highlighted in last week’s chart. What concerns us is that Chairman Powell’s dovish comments that the Fed now expects to raise rates twice next year, rather than three times as previously communicated, should have provided some relief. That clearly did not happen. Even with supportive economic activity, strong corporate fundamentals and attractive valuation levels, the US stock markets remain fragile.
