May 2022 FED memo
- during this meeting raise 50 bps from 0.25%-0.5% to 0.75% to 1%.
As the market expected. Expectation = result is the most important but not metrics. - 6/1 start QT (quantitative tightening) overall $47.5bn per month(30bn bonds, 17.5 MBS), three months later(9/1) QT overall change into $95bn. QT will continue until ample reserves, which could end at 3Q2023 as MM expected.
- rate hike in June and the following meeting will be 50 bps said by Powell, and Fedwatch originally forecast to be 75bps rate hike in the June meeting, which cause market rebound after FED’s announcement. Yellen also announced they are planning to downsize the auction bond size in the next three months.
- March SEP showed neural rate FED is targeted at is 2.25%-2.5%, however, the market is dynamic so it’s not sure. And Powell also said that it’s still a long way to neural.
Inflation includes durable and non-durable goods, durable goods include labor cost, education, insurance, and non-durables include energy, food, housing, and car price. If the inflation environment continues, non-durable goods will go up either, which may cause economic stagnation. Also, there are possibilities that a wage-price spiral might happen, now FED still didn’t see that.
Market in next few months might go up but in a volatile way, expect tech sector rebound but need to compare with valuation downside, and the comparison target could be S&P500. And if want to pitch growth stock should be very stringent, they should have EPS and top-line growth 50% you.
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