Stocks Drop, Is the Fed to Blame?
- U.S. Stock are down sharply at the open
- Many news outlets are blaming the Fed for the selloff
- Selloff was predicted two days earlier.
U.S. stocks are down sharply in early Thursday trading. The Dow Jones Industrial Average is down nearly 1000 points, and the damage is spread widely across various sectors.
Two days ago, we explained why the selloff was about to occur.
It would be easy to tie the selloff to yesterday afternoon's Fed meeting. That's the general media spin, but a look at the chart proves otherwise.
The above chart shows the movement of the S&P 500 at the time of the Fed announcement and press conference, in the area shaded yellow. There was no sharp selloff at that time, just some volatile back-and-forth movement.
What we see instead is a slow but persistent march lower. This demonstrates that the Fed wasn't the cause of today's selloff.
Actually, the Fed did everything it could to boost market confidence. The U.S. central bank said it would keep its main interest rate near 0% through the end of 2022, and maintain or increase its level of bond purchases.
This one's not on the Fed. We were overdue for a selloff, and we got it.