WSJ: Historically No Bottom Until The Fed Eases

WSJ headline: Stocks Historically Don’t Bottom Out Until the Fed Eases

Subheadline: Investors ask how long the selloff will last after the S&P 500 posts its worst week since March 2020

By Akane Otani
June 20, 2022 5:30 am ET

Investors have often blamed the Federal Reserve for market routs. It turns out the Fed has often had a hand in market turnarounds, too. Going back to 1950, the S&P 500 has sold off at least 15% on 17 occasions, according to research from Vickie Chang, a global markets strategist at Goldman Sachs Group Inc. On 11 of those 17 occasions, the stock market managed to bottom out only around the time the Fed shifted toward loosening monetary policy again.

Getting to that point may be painful. The S&P 500 has fallen 23% in 2022, marking its worst start to a year since 1932. The index declined 5.8% last week, its biggest decline since the pandemic-fueled selloff of March 2020.

And the Fed has only just gotten started. After approving its largest interest-rate increase since 1994 on Wednesday, the central bank signaled that it intends to raise rates several more times this year so it can tamp down inflation.

Note: I am amazed at how many of these subscription “gurus” on Twitter have called “the bottom is here” since the new year began. One of these days, like a broken clock, they will get it right, and then they will erase all their bad calls, leave the one “good” call up, screenshoot it, and use it for marketing.

How high will unemployment rise before the Fed eases its interest rate increases?