Futures for US stocks rose on Thursday as investors carefully studied the Fed's rate decision and Chairman Kevin Warsh's comments.
On September 16, the Fed raised the rate by 0.25 percentage points to 3.75-4%.
It would seem that the opposite should be the case: the rate is higher. Loans are more expensive. It is more difficult for businesses. Stocks are getting cheaper.
So what is the logic of investors?
The market is looking not only at what the Fed has done, but also at what was expected of it.
The rate increase has already been included in the prices. And after the decision, investors saw fewer reasons to expect even tougher policies in the future.
Reuters notes that after the Fed's decision, long-term U.S. bond yields declined. This has supported stocks, especially technology stocks.
In other words, an interesting situation turns out: the Fed raises the rate, which in itself is bad for stocks, but at the same time the market receives a signal that further tightening may not be as strong as expected.
If inflation declines, the Fed will be able not to raise the rate further. The market will expect that money will become cheaper over time, which means it will be easier for companies to attract financing, develop their business and expect to increase profits in the future.
It is precisely these expectations that support the growth of the stock market in this case.
On the stock exchange, not only the fact of the event itself is important, but also how different it is from market expectations.
