It’s pretty clear that the big picture narrative that the stock market cares about most is inflation, and, more importantly, the impact that rising inflation — at least if it’s not “transitory” and instead sticks around — will have on future interest rates and the ongoing spigot of free money that has supported stock prices. It’s Fed Chair Jerome Powell’s market, we’re all just watching. Especially in times like right now, where we’re in a lull without any big quarterly earnings reports.

That was never more clear than when the latest Fed announcement came out on Wednesday at 2pm, causing an instant (if minor) selloff in pretty much everything — gold and other commodities, the S&P 500, the Nasdaq 100, the broad bond indexes, they all dropped the moment Powell’s words crossed the ether to reach our screens.

Is that because they raised rates? No, it’s because they said they’re thinking about maybe raising rates in a year and a half instead of in two years… and that some of their quantitative easing might begin to get pared back as well, though not imminently.

All of that should obviously have been expected by any sane observer, with many people believing the Fed’s slight “hawkish” language change was not nearly enough given the risk of inflation, and the shift in language about the future from the Fed is clearly inspired by the fact that the economy has heated up even faster than anticipated coming out of the pandemic, and caused inflation expectations to spike higher than most thought. Part of the Fed’s job, at least as it is seen these days, is not just to set interest rates at a level that will ensure price stability and full employment… but to massage the market’s interpretation of those future rates with their press conferences and commentary to try to avoid harsh resets in prices. Jerome Powell doesn’t want to cause a “taper tantrum” like Ben Bernanke did in 2013, which caused a temporary panic in income-related investments, so they’re trying to stay ahead of the curve and smooth our collective feelings. “Sentiment smoothing” is obviously an art, and not something everyone learns while getting a PhD in economics.

It’s a little silly to pretend that the Fed somehow knows what the financial world will look like over the next couple years, and will be able to precisely map the course ...