Stocks Historically Don’t Bottom Out Until the Fed Ease

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.  

Tightening monetary policy, combined with inflation running at a four-decade high, has many investors fearful that the economy might go into a downturn..

Data on retail sales, consumer sentiment, home construction and factory activity have all shown significant weakening in recent weeks.  

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