Why The Market Reacted Like It Did Today

By OP

September 13, 2022

The stock market lately acts as a testy teenage boy where the slightest trigger will send him raging. This is what we saw today, September 13th, in the stock market. Overall, the CPI report on inflation wasn’t too bad. But when you combine it with the aggressive tactics Fed Chair Jerome Powell has been taking over almost the last year, it makes a lot of sense.

The Fed has been aggressively increasing rates to attempt a soft landing with an economic slowdown. They succeeded on the latter. The “soft landing” part is why the market reacted as it did. The CPI report today showed that the plan of a soft landing is far from fruition, rather, making it appear we are in for a very rough landing.

The aggressive Fed tactics aren’t working, so a new plan needs to be formulated. It seems Jerome Powell knew all along that this was the case, commenting a few weeks ago that we need to prepare for economic “pain” and Jamie Dimon, CEO of the USA's largest bank - JPMorgan, states there’s a hurricane in our economy’s forecast.

The spokespeople for the government, the ones communicating to the public that we aren’t in fact in a recession and current market conditions are hunky dory, again, act as the testy teenage boy leading on his prospects. The reality of our economy’s future is uncertain, but we can say with almost certainty that it won’t that soft landing we were led on to believe - just as inflation turned out not to be transitory.

For a more in-depth view on market conditions, consider reading Economic Health by Chase Bonenfant.