Stocks Finished Mostly Higher On Friday, But Lower For The Week  Image: Bigstock Stocks closed mostly higher on Friday with only the Dow slipping into the red at the close. But all of the indexes were down for the week, with the S&P logging their worst week since March 2020 when the pandemic was just getting started. Last Wednesday, the Fed raised interest rates by 75 basis points. And they forecast three more 50 basis point hikes and one 25 basis point hike by year's end, putting the Fed Funds rate at 3.4%. (They also left the door open for another 75 basis point hike in July rather 50.) The more aggressive stance was cheered afterwards as it signaled the Fed was getting serious about combatting inflation after being slow on the draw. But the next day, stocks tanked on worries that the higher rates could very well tip the economy into a recession. That fear was magnified when the GDP Now forecast by the Federal Reserve Bank of Atlanta lowered their estimate for Q2 to 0.00% from 0.9% previously, and from 2.5% in mid-May. (Q1 came in at -1.5%.) With inflation at a 41-year high, the Fed needs to get aggressive. But it comes at a precarious time as the economy is already slowing. Nonetheless, the Fed is estimating that the economy will advance throughout the rest of the year, putting full-year GDP at 1.7% by year's end, and then 1.7% again in 2023. So the Fed is not expecting a recession, and is still forecasting growth. But the market seems to be discounting that forecast. At least for the moment. As I mentioned last week, stocks are extremely oversold as the market seems to be pricing in the worst. But there's plenty of positives in the economy right now that have been virtually ignored during this sell-off. And eventually, the market will have to take notice. In the meantime, stock valuations are at multi-year lows. And that means there are some great bargains out there. It's also worth noting that, with the S&P officially entering a bear market last week, it's important to remember that the median return once a bear market has begun is nearly 3% one month later, more than 5% three months later, and more than 23% a year later. So for those rushing to get out, just remember the above stats. It should also be known that the faster a bear market begins, the shallower it tends to be. And the rallies that follow after a bear market has ended, are even bigger. In fact, the big gains that follow a bear market can be quite spectacular. It's also important to remember that a large part of any bull market recovery typically comes at the very beginning. So keep your eyes on the big picture. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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