{"id":5799,"date":"2022-06-21T15:00:35","date_gmt":"2022-06-21T21:00:35","guid":{"rendered":"https:\/\/www.keystonefinancial.com\/?post_type=oi_article&p=5799"},"modified":"2022-06-21T15:00:36","modified_gmt":"2022-06-21T21:00:36","slug":"market-commentary-june-21-2022","status":"publish","type":"oi_article","link":"https:\/\/www.keystonefinancial.com\/articles\/market-commentary-june-21-2022","title":{"rendered":"Market Commentary | June 21, 2022"},"content":{"rendered":"\n
The fight against inflation intensified.<\/p>\n\n\n\n
Last week, the Federal Reserve (Fed) delivered a message that it is serious about fighting inflation. The Federal Open Market Committee (FOMC) lifted the federal funds target rate by 0.75 percentage points. The fed funds rate is now 1.50 percent to 1.75 percent.<\/p>\n\n\n\n
The Fed also has begun to shrink its $9 trillion balance sheet by selling Treasury securities and agency mortgage-backed securities, a process known as quantitative tightening (QT), reported Kate Duguid, Colby Smith, and Tommy Stubbington of Financial Times (FT). The Fed\u2019s balance sheet expanded greatly during the past few years as it engaged in quantitative easing (QE). QE entailed buying Treasury and agency securities to ease financial conditions, strengthen the economy, and support markets during the pandemic.<\/p>\n\n\n\n
If QT was a rate hike, it would be \u201croughly equivalent to raising the policy rate a little more than 50 basis points on a sustained basis,\u201d according to a paper published by the Fed in June. Although, the authors stated there was considerable uncertainty associated with the estimate. It\u2019s hard to be certain about what will happen when the Fed has only attempted QT once before.<\/p>\n\n\n\n
Global markets weren\u2019t enthusiastic about the fact that the Fed and other central banks are tightening monetary policy. Harriet Clarfelt and colleagues at FT reported, \u201cUS stocks have suffered their heaviest weekly fall since the outbreak of the coronavirus pandemic, after investors were spooked by a series of interest rate increases by big central banks and the threat of an ensuing economic slowdown.\u201d<\/p>\n\n\n\n
It\u2019s likely that markets will continue to be volatile, according to the CBOE Volatility (VIX) Index\u00ae, which measures expectations for volatility over the next 30 days. The VIX is known as Wall Street\u2019s fear gauge. Last week, it rose to 31. That\u2019s well above its long-term average of 20.<\/p>\n\n\n\n
Last week, major U.S. stock indices tumbled, and yields moved higher across much of the Treasury yield curve.<\/p>\n\n\n\n