Why did the market rise on Powell's inflation comments?

Moomoo Learn joined discussion · Jan 12, 2022 15:54

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US stock indexes gained ground on Tuesday with Nasdaq leading the advance as investors were relieved that Federal Reserve Chair Jerome Powell's testimony to Congress did not include any major surprises.

Why did the market rise on Powell's inflation comments?

Why the reaction?

The market has been trying to digest the interest rate hikes for weeks. Investors are already prepared for the worst. When there was no surprise news, the market tended to recoup some losses immediately.

Moreover, Powell was optimistic that supply-chain bottlenecks would ease this year to help decrease inflation, giving investors some time to take a breath.

Key takeaways of Powell's re-nominations hearing

On Tuesday, Federal Reserve Chairman Jerome Powell said that the economy is both healthy enough and in need of tighter monetary policy.

That likely will entail interest rate hikes, tapering of monthly asset purchases and a smaller balance sheet.

Powell made the comments during a confirmation hearing in which key senators indicated they will be supporting him for a second term.

The bottom line

Daily fluctuations of the stock markets are directly or indirectly affected by the changes in macroeconomic factors. The Fed is also making a balance between inflation control and economy growth.

Predicating the future trends is never the major task throughout investing. Investors need to work on investment skills. Only being fully prepared could help you weather whatever comes.

After all, an investment in knowledge pays the best interest.

"History never repeats itself, but it rhymes," Mark Twain said. After reading those historical news and reports, you will understand the words better and be more calm about those short-term influences.

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