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Has stocks priced in the recent Fed's rate-hike pause?

Having raised interest rates in 10 consecutive FOMC meetings, the Fed decided not to raise rates or “pause.” The pause in rate hikes comes with the caveat that the Fed will resume raising rates as early as the next FOMC meeting in July.

After rallying strongly ahead of last Wednesday’s Fed’s rate-hike pause, stocks have pulled back and are now trading at around the same levels as the day of the June FOMC meeting. Although many claim that pausing the rate hike process is a significant market development, recent stock market actions do not support these claims.

Others believe that only when the Fed officially ends the rate-hike cycle will this lead to the start of a sustainable economic expansion and stock market bull rally.

It is difficult to determine if the one-day Fed’s rate-hike pause will have any significance for the stock market because of the widespread expectation that the Fed will resume raising rates at subsequent FOMC meetings.

With the Fed Funds rate standing at 5.25% and likely headed toward 5.5% as early as the next July FOMC meeting, the market actions over the past week imply that stocks may have already priced in the recent Fed’s rate-hike pause.

Since most stock market indexes are trading at around the same levels as the day of the Fed’s meeting last Wednesday, it would imply the financial press and media may be making a lot of noise about nothing.

For your reference, enclosed are the closing prices of the day of the Fed FOMC meeting on 6/14/23 and today’s closing prices for the following stock market indexes:

S&P 500 Index (SPX) – 4,372.59 (6/14/23) and 4,381.89 (6/22/23)

Dow Jones Industrial Average (INDU) – 33,979.33 (6/14/23) and 33,946.71 (6/22/23)

NYSE Composite Index (NYA) – 15,642.73 (6/14/23) and 15,600.70 (6/22/23)

Nasdaq Composite Index (COMPQ) – 13,626.48 (6/14/23) and 13,630.61 (6/22/23)

Nasdaq 100 Index (NDX) – 15,005.89 (6/14/23) and 15,042.32 (6/22/23)

S&P 400 Mid-cap Index (MID) – 2,566.55 (6/14/23) and 2,544.07 (6/22/23)

S&P 600 Small-cap Index (SML) – 1,199.06 (6/14/23) and 1,185.87 (6/22/23)

iShares Micro-cap ETF (IWC) – 111.11 (6/14/23) and 109.12 (6/22/23)

MSCI EAFE Index (MSEAFE) – 2,157.57 (6/14/23) and 2,138.78 (6/21/23)

MSCI Emerging Markets Index (MSEMF) – 1,014.91 (6/14/23) and 1,004.27 (6/21/23)

The bottom line is the Fed’s pause probably carries little significance. It can lead to short-term market volatility, as it has done so in the past week. Only when the Fed announces the end of the rate-hike cycle will the financial markets and stocks respond forcibly, preferably with sustainable and broader buying.

Source: Chart courtesy of

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