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The Power of Positive Thinking Returns to Markets

The ability of sentiment to influence the direction of markets was on full display this past week. Investors emerged from deep gloom and managed to find price-supporting rays of light even in clouded news.

The most important was in the interpretation of comments by Federal Reserve Chairman Jerome Powell on Wednesday after the Fed lifted interest rates by 0.75 percentage point. Mr. Powell—finally—stopped offering guidance on what the Fed would do next, gave no reassurance that recession could be avoided and when asked about cuts next year pointed to last month’s forecast that rates would rise further in 2023.