Fed press conference earlier today was more of the same. They are not sure about how the economy will react to the CY22 interest rate hikes. The key question everyone is wrestling with is when will they stop increasing interest rates and when could they start reducing interest rates. Reducing interest rates doesn’t seem to be an option in CY23 with inflation still above 7% far away from the Fed’s target of 2%. As of now, Fed seems to be pretty consistent that they will increase interest rates by maybe another 50-75 bps and then pause to see the impact of the CY22 interest rate hikes on the economy (with a lag). Hence the Fed is in a wait-and-watch mode and will be more of a spectator in CY23 rather than an active participant. We are less worried about the Fed and more focused on which companies will not only weather the storm better than the others but also grow well on the other side. CY23 will likely be a stock pickers market where individual company earnings will drive the stocks rather than Fed’s interest rate announcements.
