fueling traders' fears that the Fed will have to raise interest rates above 5% and then keep them there for the rest of 2023 to curb soaring prices.
When borrowing costs rise, stocks tend to fall because the decline in their future cash flows chips away at their valuations. But the recent stock slump isn't necessarily bad news for investors, according to Borio – who said that stocks' February struggles suggest investors are finally aligning their expectations with the hawkish Fed, reducing the risk of a surprise rate hike triggering a stock market crash.
"The sanguine attitude of investors contrasted sharply with the cautious tone of policymakers," he said."Central banks gave no indication that monetary easing was on the horizon." "In early February, renewed evidence of strong labor market conditions and solid growth nudged investors to bring their views more in line with central banks," he added.
Not until SPY hits 3k, otherwise many are still fighting JerrBear
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