Markets Respond To Fed Investigation With Traditional Panic
First, everyone sells. Then, some people buy because prices dropped. Then, everyone remembers the central bank is under attack and sells again.
[Stock market chart showing classic panic-rally-panic pattern]
The Dow Jones, doing its best impression of a heart attack
Financial markets responded to news of the Federal Reserve investigation with their traditional display of rational, measured panic, sources confirm. The Dow Jones Industrial Average fell 847 points in early trading, rallied 312 points when traders forgot what they were panicking about, then fell another 623 points when they remembered.
“Markets hate uncertainty,” explained one Wall Street analyst, shouting to be heard over colleagues running in circles and throwing papers. “And there’s nothing more uncertain than finding out the institution that controls the entire economy is being investigated by the same administration that appointed it.”
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In my 30 years of experience, I’ve never seen anything like this. Actually, I’ve seen this exact thing approximately every 18 months. But this time feels special.
The investigation into Fed Chair Jerome Powell has raised questions about central bank independence, monetary policy stability, and whether any of the rules that used to matter still apply. Traders, faced with this existential uncertainty, did what they always do: sold everything, regretted it, bought some things back, regretted that, and then went to lunch.
“The key is not to make any sudden moves,” advised one portfolio manager, sweating visibly. “You want to sell before everyone else, but buy before everyone else comes back. The timing is crucial. Unfortunately, everyone else has the same idea, so it’s essentially just a very expensive game of musical chairs.”
Market Panic: A Comprehensive Guide
- Stage 1: Bad news breaks. Everyone sells.
- Stage 2: Prices drop. Bargain hunters buy.
- Stage 3: Brief rally. “Recovery” declared by optimists.
- Stage 4: Someone remembers the original bad news. Everyone sells again.
- Stage 5: Prices drop further. “Buying opportunity” declared by optimists.
- Stage 6: Repeat stages 2-5 until everyone gives up.
- Stage 7: Quiet recovery over 18 months. No one notices.
Safe haven assets rallied as investors fled to gold, Treasury bonds, and whatever else seemed least likely to be affected by political chaos. Bitcoin, which some investors inexplicably believe is a safe haven, also rallied, because nothing says “stability” like an asset that can lose 40% of its value on a Tuesday.
“I’ve moved everything into gold,” announced one retail investor. “And by ‘gold,’ I mean the Gold ETF, which is actually just a piece of paper representing gold that I don’t own. But it makes me feel like I own gold, and in these troubled times, that feeling is all that matters.”
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Diamond hands, baby. I’m not selling. I’m also not looking at my portfolio. I’ve deleted the app. I assume it’s fine.
Fed officials attempted to calm markets by issuing a statement affirming their commitment to price stability and maximum employment. However, the statement was undermined somewhat by its opening line: “We are still operational, for now.”
By market close, the major indices had settled into what analysts described as “nervous equilibrium,” meaning everyone was too exhausted to panic further but too worried to stop refreshing their screens. Trading volume was approximately triple the daily average, most of it occurring in a 45-minute window when someone on CNBC suggested the investigation might be dropped.
Financial advisors have recommended that investors stay calm, maintain their long-term perspective, and remember that market volatility is normal. They have also recommended keeping a bottle of whiskey in the desk drawer, just in case.
Markets will reopen tomorrow, where the cycle will presumably continue until either the investigation is resolved, the administration changes its mind, or everyone simultaneously agrees to pretend none of this is happening.