On Wednesday, the S&P 500 stock index jumped 3 percent, as though all was right with the world.
It was the fifth consecutive weekly decline in the S&P 500, its longest streak of losses since June 2011.
Powell, the Fed chair, said unequivocally during a news conference on Wednesday that the central bank was really and truly committed to driving down inflation.
The Fed is willing to increase unemployment in the United States if that is what’s required to get the job done.
Pretty much since the start of the great financial crisis that began in 2008, the loose monetary policy of this very same Federal Reserve has repeatedly propelled financial markets to giddy heights.
Yet at its latest policymaking meeting on Wednesday, the Fed made it more obvious than ever that it has shifted its policy in a fundamental way.
“This is a very big change, and the markets are having trouble processing it,” Robert Dent, senior U.S.
The Covid-19 pandemic has left millions of casualties worldwide, and it’s not over.
Then there are the continuing lockdowns in China, which have reduced the supply of Chinese exports and dampened Chinese demand for imports, both of which are altering global economic patterns.
It helped to reduce the impact of the 2020 recession in the United States — and it contributed to great wealth-creating rallies in the stock and bond markets.
This is how Mr. Powell put it on Wednesday.
But its tools for reducing the rate of inflation without causing undue harm to the economy are actually quite crude and limited, he later acknowledged, in response to a reporter’s question.
As if that were not scary enough, for an operation as delicate as the Fed is attempting, he added: “No one thinks this will be easy.
Well, fine.
The Fed also said it would begin reducing its $9 trillion balance sheet in June by about $1 trillion over the next year, and it continues to issue cautionary “forward guidance” — warnings of the kind that Mr. Powell made on Wednesday.
Financial conditions are going to get much tougher — as tough as needed to stop inflation from becoming entrenched and deeply destructive.
The day-to-day shifts in the markets are about as informative as the meandering of a squirrel.
It is important, as always, to make sure you have enough money put aside for an emergency.
Cheap, broadly diversified index funds that track the overall market are being hit hard right now, but I’m still putting money into them.