Broker Check

Market Update 20220831 2:30pm

August 31, 2022

Since my last update, Chairman Powell last week used the “pain” word, to describe the likely outcome near term to continued Fed tightening. He said further: “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”  Shortly thereafter, the market turned downward. Hard fought gains from the June low have been eroding ever since.

Today all major averages reside below their short, intermediate and long-term trend lines.

The character of the housing market is changing also. New home sales have fallen to a six year low.


Home inventory is on a rapid rise.


It’s clear to me that Fed tightening is already having the desired effect particularly in the housing market. 

The Fed’s dual mandate is to maintain price stability while maximizing employment.

The challenge for the Fed now is how high must they raise rates to rein in inflation and to restore price stability while maximizing employment.  And remember that as the Fed raises rates, it will cost the federal government more money to service the $30 Trillion national debt. 

So, the elephant in the room is can the Fed engineer a soft landing?  In the past, they have not been very good at this, however, economic circumstances today are far different than they have ever been.  Only time will tell whether the Fed will be able to restore price stability without derailing our markets further.