Hedge fund legend David Tepper believes the Federal Reserve has done a good job showing that policymakers don’t sleep at the wheel.
Appaloosa head told CNBC’s Scott Wapner Thursday morning that the stock market was fine despite the Fed’s tightening of the rate hike schedule.
“I think the stock market is still okay at the moment,” Tepper told Wapner.
Dow futures fell slightly on Thursday, a day after the 30-stock average closed 265 points, or nearly 0.8%, as the Fed announced two rate hikes in 2023. In March, it had not expected any rate hikes until at least 2024 Wednesday, as expected, left rates unchanged at their level of nearly 0% and did not mention the adjustment of the Fed’s massive bond purchase program from the Covid era.
Fed critics have said that policymakers are not acting fast enough to eradicate soaring inflation in an economy that is recovering so strongly from the depths of the pandemic.
The Fed raised its inflation estimate to 3.4% on Wednesday, a full percentage point above the March forecast. However, the policy statement following the June meeting continued to claim that inflationary pressures were “temporary”, although recent data on both wholesale and consumer prices showed that inflation was at a pace that has been maintained for more than a decade has not increased any more.
The 10-year government bond yield rallied Thursday morning, trading around 1.56% on both sides. The 10-year yield, which is moving in the opposite direction to the course, was just under 1.5% shortly before the Fed’s announcements.
About a week before the Fed’s March meeting, CNBC’s Tepper Joe Kernen said it was very difficult to be pessimistic on stocks, and he thought the government bond sell-off that was driving yields was likely over.
Three months later he was right on both counts.
Bond yields, which climbed from under 1% in January to a series of 14-month highs of over 1.7% in late March, have fallen since then, most recently in a trading range. The S&P 500 and the Nasdaq closed on Monday with record values. At the close of trading on Wednesday, these benchmarks were still less than 1% off those highs. The Dow was more than 2% off its previous record high in early May.