Fed tightening ‘is very much a soft landing’: Yahoo Finance’s Andy Serwer

Yahoo Finance Editor-in-Chief Andy Serwer recaps Fed Chairman Jerome Powell's remarks on inflation, raising interest rates, and where the market stands following today's Fed decision.

Video transcript

ADAM SHAPIRO: So markets were trading to the upside, even after we got the FOMC statement. It was during Jay Powell's presser when investors got a little worried, and we started selling off a bit. Let's bring in our editor-in-chief, Andy Serwer, for his take on what we're witnessing and what may be worrying people who invest in all kinds of assets. Andy.

ANDY SERWER: Yeah, Adam, you know, it kind of reminds me back during the Trump administration when the president-- then president Trump would complain about Jay Powell, saying the statement was fine, but then when he started talking, the market would go down if you remember that. But, you know, I think that there's probably no-- certainly no intent on Chair Powell's part to do that. And I don't even really know if there's any sort of correlation as the former president suggested there was.

I think if you want to sort of take a big step back, you know, boy, the Fed and the Fed chair have been all about telegraphing these rate hikes. And you have to be hiding under a rock on another planet to not know they're coming.

And if you think about it, you guys were talking about a landing a little while ago on the program. And I think that's kind of what we're getting here. I mean, it may not seem like a soft landing because it's been very bumpy this year. But in fact, if you look back a couple of years from now, this is very much of a soft landing. And of course, it remains to be seen where we go from here, you guys.

EMILY MCCORMICK: Well, and Andy, I think one of the big takeaways that I had from this press conference was that taken together, it seems like the Fed is going to be more willing to raise interest rates if we get data pointing to a higher and longer lasting inflation, rather than continuing accommodative monetary policies in the face of potentially downside employment surprises.

And I'm wondering how much more explicit do you think Powell could have been, if at all, to potentially assuage some of these markets? Because it does seem some of these lingering uncertainties about the extent of interest rate hikes, the timing of the balance sheet reduction, is what's really concerning market participants right now.

ANDY SERWER: Yeah, but I mean, maybe as you're suggesting, Emily, I mean, hello, right? I mean, he is really making it very, very clear, and it's sort of like he really means it-- they're really going to do this in March. I mean, of course, unless everything falls off a cliff between now and then. So I think that there's little doubt. And to the extent that that means that people need to continue selling growth stocks off, I think that's a definite reality or certainly, a possibility going forward.

And the reason why, of course, is these growth stocks are all about a future stream of earnings, say, $100,000 in the future, well, those $100,000 that you would be getting paid in the future are worth a lot more when interest rates are 0 than when, say, interest rates are 7%, if you think about it. So that's exactly what's going on. You'll read all kinds of things that say, oh, actually, growth stocks do OK. But it really is a wind specifically in growth investors' faces.

Having said that, you know, it's kind of encouraging this afternoon to see some of those big names still trading on fundamentals. Microsoft is up still because of last night's earnings, which were robust. Intel got a nice bump today as well because of a settlement in Europe, and Nvidia with the breakup of the ARM deal. So those big tech names are up. And Google's even up. So all is not lost here, but, you know, this is a time of reckoning potentially.

Now the real question is, is this still-- I mean, we know it's not transitory. No one's talking about that anymore. But is it really all COVID-related? And if COVID goes away, we're still going to have some friction with China when it comes to supply chain. But it could turn around fairly quickly. I mean, how systemic has it become? Or has COVID triggered systemic inflation?

ADAM SHAPIRO: It's the question that if we could answer it today, we'd all be wealthy people tomorrow. Andy Serwer is our editor-in-chief. Thank you for joining--