Was Fed Chairman Jerome Powell the big bad wolf of 2022? Will his reputation turn in 2023?

Federal Reserve Chairman Jerome Powell, nicknamed "JPow" by traders and investors for his ability to drive the stock market up or down with his decisions, has become a government figure adored for its accommodating policies between 2018 and 2021.

Retail traders who entered the stock market at the start of the COVID-19 pandemic learned about Powell for the central bank's decision to provide substantial liquidity to the stock market , helping to save the economy during lockdowns. This became known as "money printing" among retailers.

While the quantitative tightening that began in 2022 didn't make traders laugh at first, after a year of bear market it may be time to see some humor in how the Fed provided a solid bull market for new traders before unplugging.

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Lately, traders have begun to fear Fed meeting minutes and Powell press conferences, often leading to selling pressure on major indices ahead of monthly events. But is Powell the "big bad wolf" of Wall Street or a hero in disguise?

Looking ahead to 2022

Among retail traders and the general American public, fondness for Powell began to wane in late 2021, when the central bank began to shift its tone, signaling that a series of bullish rates in 2022 were necessary to curb galloping inflation. The Federal Reserve delivered on its promise by implementing seven rate hikes last year, including four consecutive 0.75% hikes and two 0.5% hikes, which were launched with a first hike of 0.25%. % on March 17, 2022.

With the fed funds rate now hovering between 4.25% and 4.5%, traders are hoping the central bank will begin to ease the rate hike in the first half of 2023 before keep rates around 5%. % for the rest of the year.

If this happens and key indicators, such as unemployment insurance claims and the consumer price index, start showing that the economy is weakening significantly , the S&P 500 could begin to rally in 2023 as the stock market is generally forward-looking.

As things stand, the bears are in firm control and have fought back against the bulls on every rally over the past 12 months.

Some of the rallies have fooled optimistic analysts such as Chief Market Strategist at CarsonGroupLLC, Ryan Detrick, who tried to preemptively call the end of the bear market on December 1, 2022 , just nine months into the cycle, giving false hope to retail traders who hold blood red wallets. Between December 1 and December 28, the S&P 500 fell 7.5%.

As the S&P 500 broke above the 200-day simple moving average on December 1, indicating that a bull cycle could be on the horizon, Benzinga saw signs of a bullish trap, which we highlighted on December 9 and finally materialized, with December closing the month down 6%.

In 2022, the S&P 500 lost a total of 20%

Looking towards 2023

If the stock market begins to rebound in a bull cycle in the third quarter, it will align with the average bear market duration of about 21 months. The S&P 500 has been in a bear market since January 2022, although technically the cycle wasn't confirmed until June 2022, when the index fell more than 20% from its January 4 high. /p>

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