Wall Street and the Federal Reserve appeared to enter a new reality this past week, and the result for investors was big losses with no obvious end point in sight. The S&P 500 posted its 10th down week in the last 11, and is now well into a bear market. The Dow Jones Industrial Average fell below 30,000 for the first time since January 2021 this past week.
Unlike recent drawdowns for stocks, however, the central bank will not be putting a bottom in the market. Instead, the Fed raised interest rates by three-quarters of a percentage point on Wednesday — its biggest since 1994 — and signaled continued tightening ahead. Chair Jerome Powell will testify before Congress next week and is expected to hold firm on his plan for a more aggressive Fed until inflation is brought to heel.
Bank of America equity strategist Ajay Singh Kapur said in a note to clients on Friday that it is time for investors to stop fighting the Fed and give up the buy-the-dip mentality.
"In a bear market, heroism is punished. Valor is unnecessary, and cowardice is called for in portfolio construction — that is the way to preserve capital and live to fight another day, waiting for the next central bank panic, and better valuations and a new earnings upcycle," Kapur wrote.
