February was one of the market’s most volatile months in years. And it was wild until the end, with stocks falling again in the last two days of the month, causing the U.S. market to close February with a loss. But, remember, the market has historically come back and gained new ground in the long run, and MoneyLion Plus portfolios are designed to weather all market cycles — whether bonds are up and stocks are down, or vice versa.
The month-end volatility was likely driven mainly by statements from Federal Reserve Chair Jerome Powell, who is also Chair of the FOMC. He indicated that the economy had strengthened, causing speculation about additional interest rate increases, which are sometimes implemented in an attempt to combat inflation. When the market is expecting higher interest rates, bonds look a bit more attractive — and stocks less so. Clearly, it doesn’t take much, even just a few words, to move the markets, for better or for worse.
What’s next? If inflation truly is increasing, more short-term volatility could be in store. But if it remains steady, stocks may do quite well, as the outlook for the U.S. economy remains strong and corporate profits are up. Only time will tell what happens next, but we believe the best way to benefit over the long term is to stay invested.
Fun fact: Hawks vs. doves ( ? vs. ?)
Powell replaced Janet Yellen this year as the Fed’s new Chair, and many are discussing whether he’ll be a “hawk” or a “dove.” A hawk thinks keeping inflation low is the Fed’s top priority. A dove focuses other issues, particularly low unemployment, instead of worrying solely about low inflation. As the year unfolds, we’ll see whether we have a dove or hawk at the helm.
- Feb 22: Understanding this week’s FOMC frenzy
- Feb 16: Market theme du jour: Inflation
- Feb 13: Five ways a federal rate increase affects you
- Feb 9: Stay focused on your long-term goals