Art Hogan, chief market strategist at B Riley Wealth, joined Cheddar News to discuss the latest rate increase by the Federal Reserve as Fed Chair Jerome Powell acknowledged that inflation was cooling.

Fed's Powell Says Job Market Is Tight But Inflation Is Cooling

The Federal Reserve raising those rates once again, but at a slower pace, just by a quarter of a percentage point for our viewers tuning in after a strong january for the stock market investors hoping potentially for a rebound this year, after those losses that we saw in 2022. So joining me now is Art Hogan chief market strategist at derailing the wealth are great to see you, especially on a fed day. And what does this fed decision mean for investors? Yeah, I think the two things it means, I think 25 basis points clearly is slowing the pace and that's, that was very well expected. That was consensus and by a long margin, consensus coming into this meeting. But we didn't know is how much jay Powell was going to be stern about talking hawkish and his presser and he really has been a different people. So I think expectations were for that Jackson hole jayapal, very stern. The market's getting this wrong, We've got a long way to go, et cetera. Whereas what we actually received was much more of a data dependent jay Powell talking about the fact that the disinflation process has started and there's some ways to go, especially on the service side. So I think it's it's much more of a surprise to the markets that jay Powell wasn't that much more hawkish in the presser and I think that's why the markets having a positive reaction, certainly a positive reaction. A few more rate rises, Art I heard him say. So that does kind of indicate potentially that the end is near and even kind of avoided a question about whether or not a pause was discussed here in this latest meeting. You know, it's interesting because it does seem kind of like the remaining piece of the puzzle is the jobs market as the Fed tries to continue crimping demand to bring inflation down. How does the jobs market fit into this and what do you think is ahead in these next few months for the labor market? Yeah, I think the path to a easier job market is opening up. So whether we looked at, um, the, well, just going back to 22 we started the year, the three month average jobs creation in the United States was at about 453,000 In the fourth quarter of last year, it was 253,000. So I think that the pace is working its way from, you know, very, very tight to a bit easier. And I bet that the three month average in the first three months of this year will be somewhere between 150 and 200,000. I think that's probably the normalized rate that the Fed would like to see. I think we've certainly heard about that in the, in all the layoffs. We've heard from tech companies during the earnings reporting season. And I think if we look at the weekly jobless numbers, they will likely start to pick up as we, as we get into the first quarter. So I think it's moving in the right direction. I think the good news is we've seen significant slowing in the, in the economy without crushing the labor market. And I think that's exactly the definition of a soft landing and so far it's working in the right direction. There's a potential that the unemployment rate likely starts to move up from its 40 year low of 3.53 point six closer to 4%. I think that would be a healthy place for the Fed to say our work here is done and that likely sort of um coalesces around March when they have their next meeting. Uh, you know, we saw pretty decent january for stock start and I think for a lot of investors that felt Good right after what was a rough January last year and a really rough 2022. So I was looking at some data did say sort of as goes January, so goes the year, especially after a year with the losses that we saw last year. Do you think this is voting well for how stocks might fare in 2023? I do, you know, it's certainly we hit the trifecta in the january effect. We had the santa claus rally, which is the week last week of december, the first week of january, we had the first week in january positive. We certainly had a month positive. So all those things have a pretty good track record of predicting a better year, especially when you juxtapose that against the negative year, the year before. I think what's going to be different though about the next couple of months is the janu the effect really was that sort of um let's buy everything that did terrible last year, and, and, and let's avoid the things that were really successful last year. So energy has been basically flat staples, flat healthcare flat, whereas, you know, a lot of the long duration technology trades have really popped here. I think what makes that stop is this earnings reporting season, when you have to have the news justify the moves and we're not, we're just not seeing that. So I suspect while the rally can continue, I think the makeup of that rally turns back to fundamentals where you're going to want to look at things like health care and energy and staples, at least for the first six months of the year. Alright, Art Hogan, chief market strategist at the rally wealth are always a pleasure, especially on a big Fed day. Thank you