EUR/USD Jumps To Nine-Month Highs After U.S. CPI DataThe EUR/USD pair advanced sharply on Thursday and reached its highest level since April 2022 after data showed U.S. consumer inflation slowed down for a sixth consecutive month. At the same time, the euro got a boost from hawkish comments from European Central Bank (ECB) Governing Council members, which signaled more rate hikes in 2023.
At the time of writing, the EUR/USD pair is trading at the 1.0850 area, 0.86% above its opening price. The pair reached a nine-month high of 1.0867 before easing.
The greenback faced severe selling pressure during the American session after data showed the U.S. Consumer Price Index rose by 6.5% in December, just as the markets expected, posting a 0.1% monthly decrease and decelerating from its previous reading of 7.1%. Core inflation came in at 5.7% from November's 6% rate, matching the consensus, although core prices still posted a 0.3% monthly increase.
As the annual inflation rate eased for a sixth consecutive month from its June peak of 9.1%, expectations of a less aggressive Fed are mounting. The WIRP tool suggests that investors practically discard a 50 bps hike in February as they are betting on 94.7% odds of a 25 bps increase. Against this backdrop, U.S. Treasury yields and the dollar took a hit, with the DXY index falling to its lowest level since June at 102.07.
In contrast, ECB's Governing Council member Olli Rehn stated on Wednesday that rate increases will still be necessary over the course of the next several meetings in order to restore price stability. On the same line, ECB policymaker Pablo Hernandez de Cos suggested that in order to bring down inflation expectations, rates must be raised at a consistent rate going forward.
From a technical perspective, the EUR/USD holds a short-term bullish bias according to the daily chart, as the pair is trading above its key moving averages while indicators are gaining momentum, with the RSI moving closer to overbought territory.
On the upside, the next resistance is seen at the 1.0900 area, where the 50% Fibonacci retracement of the 1.2266 - 0.9535 decline stands. Beyond that level, April's monthly high of 1.0936 and the 1.0950 area are the next barriers. On the downside, short-term support levels are seen at 1.0800 and 1.0700, followed by the 20-day SMA around 1.0645.
Inflation
The Truth About Gold (And How To Profit From It)Even if you never bought an ounce of the shiny yellow rock, Gold can gives us valuable information over time. The fact that gold was literally money for much of the worlds history and that banks still hold should tell you it still matters.
Lets discuss gold concepts and make sure we stay aware of how gold has behaved in the past. hope you enjoy the video!
Rally into 2023? Likely rally into 2023, spurred by downward trend in inflation. Likely 25bp hike at next meeting, then full stop to evaluate the damage (and give time for lagging economic data to catch up to policy changes). Unemployment will rise, possibly some deflation, and fed will cut rates towards the end of 2023 in response to negative economic data. This will cause a second drawdown. Well, the rates will be correlated with a second drawdown, but the real correlation will be between the negative data and equities.
My initial thoughts as we move into a new year. Should be an interesting one.
Love,
InTheMoney
CPI in line won't do the trick! Or will it?CPI at 6.5%. In line with expectations. Market remains rather neutral. Which means the news will probably not be a big enough kick to get us to the topside of major resistance on the charts. Unless/until JPOW & Co. actually pivot, either via language or actions, the market is likely to continue its current price action underneath our downtrend resistance.
Stew
U.S. Consumer Price Index's forecast, and there is no big changeThere is no major change in the figure, which is the same as the U.S. CPI YoY standard estimate.
The price stabilization section is entering because it has decreased compared to the previous month, but it is too early for the Fed to proceed with its policy pivot.
GBP/USD drifting, UK GDP nextThe British pound is drifting for a third straight day. In the European session, GBP/USD is trading at 1.2161, down 0.09%. We could see stronger volatility from the pound before the weekend, with the release of the US inflation report and UK GDP on Friday, both of which are market movers.
There is guarded optimism ahead of the US inflation report. Inflation is projected to drop in December, which would be music to the market's ears. The forecast for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate, which is more important, is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. The inflation release should result in volatility from the US dollar. If inflation, particularly the core rate, falls as expected or more, the US dollar will likely lose ground, as speculation will increase that the Fed may have to pivot from its hawkish stance and ease up on the pace of rates. Conversely, if inflation does not fall as much as expected, it would vindicate the Fed's hawkish position, which the markets may have to grudgingly accept.
There remains a dissonance between the Fed and the markets, despite warnings by the Fed that the markets are underestimating Fed rate policy. The Fed has insisted that further rate hikes are coming, while there have been market players who are expecting a "one and done" hike in February which will wrap up the current rate cycle. The markets have priced in a peak terminal rate below 5% as well as rate cuts late in the year, while the Fed has been signalling a peak rate of 5-5.25% or even higher.
In the UK, there are no major releases on Thursday, but Friday will be busy, highlighted by monthly GDP and Manufacturing Production. The markets are braced for soft numbers, which could send the pound lower. GDP for November is expected to contract by 0.2% m/m, following a gain of 0.5% in October. Manufacturing Production for November is forecast to come in at -4.8% y/y, after a -4.6% reading in October.
GBP/USD is putting pressure on 1.1832 and could test this line today. The next support level is 1.1726
There is resistance at 1.1913 and 1.2026
Will US CPI continue to feed the risk rally?Eyes on today's CPI
Risk markets set the tone on Wednesday as traders reacted to hopes that Today’s CPI data will come in lower than expected. This could lead to small interest rate hikes and could even signal peak inflation.
We’re anticipating tonight’s data and if it will live up to the hype. How much has been factored in? Could it be a disappointment if it fails to meet what’s being expected?
It is simple. We see a solid beat to the downside we think risk markets will continue to rally. We see it come in as expected, or god forbid higher, and we think they will fall.
We have done a quick price action review on the USD index and US30. Major risk currencies look to be consolidating at this stage in the lead-up. The USD index is trying to hold out at 103.00.
US CPI data is due today at 12:30 am AEDT / 8:30 am ET.
DJI/GOLD to drop longterm?It may not be that simple...
Now that inflation is in the headlines, I decided to "follow the herd" and post an idea regarding it.
To compare the current financial market with the market 100 years ago, one may analyze the pairs DJI/CURRCIR, or DJI/ GOLD .
From the chart is trivial to realize that DJI/ GOLD historically moves inside the blue channel.
Historically the following occurred in this specific order.
A. The ratio increases from the bottom of the channel (without a significant change of course) to the top of the channel.
B. RSI maximizes and then breaks it's increasing trendline.
C. Near the RSI trendline break , price breaks it's trendline.
D. Then a retest of the price trendline occurs. Only then the drop is significant.
E. Price reaches the bottom of the channel.
F. After a while, the middle of the channel is tested with a significant reaction to the downside. (In 1976 it caused the ratio to stop growing and the price went below the channel)
G. The price now increases from the bottom of the channel, and the cycle repeats...
Right now we are are in a make-or-break moment.
We haven't reached the top of the channel and already the RSI trendline is violated to the downside and RSI indecisively fluctuates a little above the 50 mark. Shortly after the attempt passing the channel axis, a rejection occured. The price trendline is violated to the downside. It seems a second trendline exists now and looks intact.
On the chart there are 3 very distinct cycles, which peaked in 1929, 1966 and 1999. The cycle lasts about 35 years. I find it very interesting that it is that consistent.
Maybe the 35 year cycle is not that consistent and we are in an abrupt stop. And in the years following having DJI/ GOLD drop significantly. And it makes sense for a drop in stocks and gold exploding. We are talking about food shortages, water shortages and war. This is not a recipe for success for stocks. Most companies need a calm climate to grow.
Or maybe in the end, even though we talk about inflation , money losing it's value and the economy being in the brink of collapse, we will grow until 2030 and then we collapse. After all, recessions happen when noone expects them to. We are also above the 1M, 3M Ichimoku clouds.
Who knows what will happen? I certainly don't know what will happen. My gut feeling is "way down we go". It may be a controlled demolition of the stock market, but I don't think we have much room to grow for now in absolute terms.
CPI data will cause Unusual move tomorrow..!I published my analysis for the 9-13 January trading week on January 8th: (My analysis was published for Patrons)
Please, read the above article before today's market end!
This is my gift to all my followers on this platform before tomorrow's explosive move!
100 analyses in one page for stocks and ETFs:
and For those who are interested in Options:
Best,
Japanese yen edges lowerThe Japanese yen continues to have a quiet week. USD/JPY has edged up 0.20% and is trading at 132.50.
There is optimism in the air ahead of the US inflation report for December. The forecast is for inflation to fall, which is exactly what investors want to hear. The consensus for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November.
We've seen in recent months how inflation reports can move the equity and currency markets and investors should be prepared for the same from tomorrow's inflation report. Soft inflation releases have sent the US dollar lower, as the markets have assumed that the Fed will ease up on the pace of rates and even cuts rates late in the year. The Fed continues to present a hawkish stance, but the markets will likely march to their own tune if inflation comes in as expected or drops even lower. The markets have priced in a peak fed funds rate of 4.93%, lower than the Fed dot plot which projects rates peaking at 5-5.25%. Some Fed members have said rates could go even higher than that, but that hasn't made much impression on the markets.
The Bank of Japan meets next week, and investors will be watching carefully. The BoJ meetings are no longer sleepy affairs with little substance, as the markets saw in December when the BoJ stunned the markets by widening the yield curve control band. We're unlikely to get more fireworks at the upcoming meeting, but the BoJ's inflation forecasts will be significant. There have been reports that the BoJ may raise the forecasts for core inflation. This would be bullish for the yen as a higher inflation forecast would be a prerequisite for the BoJ normalizing policy.
There is weak resistance at 132.13, followed by 133.30
131.25 and 130.60 are the next support lines
BITCOIN- Ahead of Inflation Data (CPI Tomorrow)Hi everyone,
watch the video and let me know your thoughts.
I cover the main Technical levels you should know as well as the key fundamental factors and scenarios.
Some good news arising today as FTX seems to have recovered 5 Billion dollars . The announcement substantially raises the total FTX has recovered since filing for bankruptcy last year but it's still short of what customers are owed in total.
Still, good news.
Not so great news from IMF : The International Monetary Fund says that 'The new year is going to be "tougher than the year we leave behind'... scary indeed as some say 2/3rds of the countries will enter into recession this year.
More bad news here and there, from Europe, Canada, Australia. Just a little example from Canada:
'The CEOs at Canada's largest banks say tens of thousands of Canadians could default on mortgages due to rising rates. This comes as the vacancy rate at Canadian office buildings are at a record high '
Lastly, we have the FED's cornered between raising or not, for how long and how much? Employment was good last week and inflation report tomorrow will play a huge role.
In general:
good inflation tomorrow (lower inflation, eased) will probably be better news for markets and BTC/Alts as well.
If inflation is high then we run for the hills as the Feds will need to consider new big rate hikes..most likely i think we will avoid this.
KEY LEVELS:
18K : A third test is expected as the last 2 times we had rejections. This time we can go higher.
One Love,
The FXPROFESSOR
PS. Remember the cycles: The next Bitcoin halving is scheduled to take place at block 840,000 which is predicted to be on Mar 13, 2024 08:47:30 PM UTC.
Inflation Report: 11 Jan 2023Finally there is a sense of relief.
The US inflation is just on a some-what downward spiral.
It's almost as if we peaked at a whopping 9.1% and now dropping to around 6%.
And let's not forget all our friends abroad, like Germany where it's dropped from 10. 4 in October down to 8.6%,
UK dropping from 11.1% slightly down to 10.7%,
Canada's 8.1 dropped to 6.8%,
France's steady 6.2%,
and China's decent1.6%.
And let's not forget our lekker country, South Africa where inflation has also dropped from 7.8% down to 7.4%.
It's just too bad all these numbers are due to supply chain issues, war, and food shortages.
But it looks like we have potentially seen the end of The Great Inflation - and now things should start to settle.
Your thoughts?
Trade well, live free
Timon
(Trader since 2003)
Fundamental and Technical Analysis | January week 2, 2023Table of Content:
1. The World Bank
2. Jerome Powell
3. Mass Layoffs
4. Corporate Headline
5. Technical
1. The World Bank
The World Bank has recently announced a slash in the forecast for global growth. This year's global growth forecast is reduced by nearly half, to just 1.7%, from its previous projection of 3%. It would be the third-weakest annual expansion in three decades, behind only the deep recessions that resulted from the 2008 global financial crisis and the coronavirus pandemic in 2020. “For most of the world economy, this is going to be a tough year, tougher than the year we leave behind,” Georgieva said. “Why? Because the three big economies — U.S., EU, China — are all slowing down simultaneously.” Furthermore, The World Bank projects that the European Union’s economy won’t grow at all next year after having expanded by 3.3 percent in 2022. It foresees China growing 4.3 percent, nearly a percentage point lower than it had previously forecast and about half the pace that Beijing posted in 2021.
2. Jerome Powell
In a recent statement led by Jerome Powell, he expressed his highest level of hawkish sentiment towards the economy. He noted that inflation is the foundation of a healthy economy and can require the central bank to take actions that are not necessary, but popular. Price stability is the bedrock of a healthy economy and provides the public with measurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.” He wants to resolve the issue he initially created, previously, he was insistent that inflation was going to be transitory and now there is a clear indication that it is not and will require major efforts to bring it down.
Why was Powell hawkish?
Financial conditions are unintentionally loosening and he does not want to see it because that will increase the probability of a rebound in markets which could mean a rebound in inflation.
- Some of the world’s largest asset managers such as BlackRock Inc., Fidelity Investments and Carmignac are warning markets are underestimating both inflation and the ultimate peak of US rates, just like a year ago. (Bloomberg)
- “Central banks are unlikely to come to the rescue with rapid rate cuts in recessions they engineered to bring down inflation to policy targets. If anything, policy rates may stay higher for longer than the market is expecting,” a team of analysts including Jean Boivin, the head of the Institute, wrote last week. BlackRock is underweight developed market equities and it prefers investment-grade credit to long-term government bonds.
- JP Morgan CEO, Jamie Dimon said Tuesday that the Federal Reserve may need to raise interest rates to 6% to fight inflation, which would be higher than most are expecting this year.
3. Mass Layoffs
In order to bring down inflation, the Federal Reserve needs to slow down the economy. It is common sense to see that an economy will not go down until consumers stop spending which results in loss of employment.
- One of Wall Street's biggest banks plans to lay off up to 3,200 employees this week, as it faces a challenging economy, a downturn in investment banking, and struggles in retail banking. It is one of the biggest rounds of layoffs at Goldman since the 2008 Global Financial Crisis. Goldman Sachs is having difficulties in the stock market, underperforming.
- Bed Bath & Beyond reported a net loss for the quarter ending Nov. 26, 2022, of $393 million. That's a widening of 29.7% from the $276.4 million loss in the comparable quarter of 2021. Furthermore, the Q3 loss is worse than the retailer's projection last week of a $385.8 million loss. These inadequate results will lay off hundreds or thousands of employees in the company. On the other hand, the stock rallied by double digits, emphasizing again that the stock market likes when employees get fired to increase profit margins.
- Coinbase announced Tuesday that it was laying off 950 people, about 20% of its staff. The job cuts come only a few months after another major round of layoffs. The crypto brokerage firm let 1,100 people go in June, about 18% of its headcount at the time. Again, the stock still rallied by double digits. It is notable to mention that the brother of the former Coinbase product manager, Nikhil Wahi, was sentenced Tuesday to 10 months for his role in a scheme to trade on confidential information about when the cryptocurrency exchange was going to list new tokens.
A comparable phenomenon I start to visualize from these and recent layoffs is the 2021 stock splits. When firms announced stock splits in 2021, their stock would surge. In 2023, when a company announces layoffs, the stock surges higher (until they run out of liquidity).
4. Corporate Headline
- The cyclical growth rebound, possibly triggered by the Chinese reopening, is being priced in or could go higher (major resistance at SPX $4,250). Macau sees deserted streets and Casinos after reopening (Reuters).
- Taiwan Semiconductor Manufacturing Co. recorded its first quarterly revenue miss in two years, signaling the global decline in electronics demand is starting to catch up with the chip giant (Bloomberg). This issue will take months to recover as it has to adapt to the oversupplied market.
- Apple is Broadcom’s largest customer and accounted for about 20% of the chipmaker’s revenue in the last fiscal year, amounting to almost $7 billion to stop buying key components, and instead, produce pieces themselves.
- Blackstone Inc. lost a bid to end rent stabilization at Manhattan's largest apartment complex after a judge ruled in favor of tenants at Stuyvesant Town-Peter Cooper Village.
- Wells Fargo, once the No. 1 player in mortgages, is stepping back from the housing market. This is a negative signal for the housing market, prices are too high and few can afford these houses. Once homeowners realize the Fed is not going to ease interest rates anytime soon, the housing market is going to slow down dramatically and individuals are going to lose their homes. Renters and Airbnb will slow down real estate further as they will not be able to pay their mortgages and will be forced to get rid of the houses, greatly increasing the supply.
5. Technical Analysis
- Momentum indicators: RSI and MACD moving toward positive momentum and volume remains below average (bullish).
- If S&P500 breaks the sloping resistance (channel), prices will rise significantly as individuals will assume the market is already priced-in, plus, showing: a break in pattern resistance; higher-low; and bear market sentiment reducing.
- This is a similar pattern to the 2000 market crash where SPX broke a major trend and resistance, then followed to fall 34%.
I point out the negative indication in most of my recent analyses, this is because the negative indications are far greater than any positive singular indication in this market environment.
Overall, I have not changed my outlook and I am keeping my government bonds. I will take the opportunity of a rise in equity markets to short BTC at higher levels.
How to use ECONOMIC INDICATORS for informed trading decisionsHello everyone! Here you have some information that I consider useful on how to interpret and use economic indicators and data to make informed trading decisions in the foreign exchange market:
GDP (Gross Domestic Product) - GDP is a measure of a country's economic output and is considered to be one of the most important indicators of economic growth. A higher GDP indicates a stronger economy, which can lead to an increase in demand for the country's currency.
Unemployment Rates - Unemployment rates measure the percentage of the workforce that is currently without a job. A low unemployment rate indicates a strong economy, which can lead to an increase in demand for the country's currency.
Inflation - Inflation measures the rate at which the average price level of a basket of goods and services in an economy is increasing. High inflation can lead to a decrease in demand for the country's currency, while low inflation can lead to an increase in demand.
Interest Rates - Interest rates are the cost of borrowing money and are set by central banks. High interest rates can attract foreign investment, leading to an increase in demand for the country's currency.
Trade Balance - The trade balance measures the difference between a country's exports and imports. A positive trade balance indicates that a country is exporting more than it is importing, which can lead to an increase in demand for the country's currency.
Political Stability - Political stability is an important factor to consider when trading in the foreign exchange market. A stable political environment can lead to an increase in demand for a country's currency, while political instability can lead to a decrease in demand.
In summary, GDP, unemployment rates, inflation, interest rates, trade balance and political stability are important economic indicators to keep an eye on when making trading decisions in the foreign exchange market. By considering these indicators, along with other market conditions, traders can make more informed decisions about when to buy or sell a particular currency.
Please note that the above information is not a financial advice and only for educational purpose, Economic indicators are important but not the only factor to consider while making trading decisions and It's always important to do your own research and consider your own risk tolerance before making any trades.
Is $130 the $AAPL bottom? 1/10 Trade Idea15m chart below and we broke above $130 at market open but we wiped all the gains and ended right at this key psychological level and 50 SMA in anticipation for Powell tomorrow and CPI Thursday. If we hold $130, I’m expecting a violent move up. Otherwise, since we have reclaimed this $130 level and closed at the lows, I’m expecting more downside kicked off by buyers who bought above $130 forced out of positions.
Nonfarm Payrolls Effect on Gold PriceOANDA:XAUUSD
Key Economics Highlight in the first week of 2023 - Nonfarm Payrolls and Unemployment Rate for December 2022 were reported on 6th January 2023.
- Nonfarm payrolls increased by 223,000 which is higher than what the market was expecting by 200,000.
- The unemployment rate fell to 3.5%, which was lower than the consensus of 3.7%.
On the night of January 6, 2023, this report had a significant positive impact on various financial assets especially Gold. Gold prices rose from 1,836 USD to 1,850 USD within 10 minutes of the reporting and it made a higher high on the weekly candle at 1,869.9 USD before closing the week at 1,866.1 USD
Technically, Gold price almost reach its significant supply zone at around 1876.5 USD. Therefore, it would not be surprising to see the gold price drops to the first support level or trade in the range of 1825 - 1876 for a while.
Fundamentally, the current US workforce participation rate still has not reached the Pre-Covid19 level and the contribution of workforce participation in US consists more aging population which could be problematic for future economy growth as there could be more labor demand but less supply since more people are going into being retired.
Therefore, it seems like the market has overreacted to this report in short term. But, speculators and investors must still continue to manage their risks based on the inflation rates and potential recession of US economy
Let us know what you guys think!~
The Misconceptions of a 'FED Pivot'Investors often want the Federal Reserve (also known as “The Fed”) to pivot its monetary policy because it can potentially have a significant impact on financial markets. A pivot refers to a change in the direction of monetary policy, such as shifting from tightening (e.g., raising interest rates) to easing (e.g., lowering interest rates).
When The Fed pivots towards easing, it can signal to investors that it is willing to support economic growth and potentially stimulate asset prices. This can lead to increased demand for stocks and other riskier assets, as investors expect that these assets will benefit from the supportive monetary policy.
However, it’s important to note that The Fed’s pivot does not always have the intended effect on financial markets.
For example;
1. In 2000, the Fed implemented QE in response to the dot-com bubble burst and the subsequent economic downturn. This policy involved the purchase of longer-term Treasury securities in order to lower longer-term interest rates and stimulate economic growth.
2. In 2007, the Fed implemented QE in response to the global financial crisis. This policy involved the purchase of a variety of securities, including mortgage-backed securities and longer-term Treasury securities, in order to lower longer-term interest rates and stimulate economic growth.
3. In 2020, The Fed pivoted towards a more accommodative stance in its monetary policy in response to the economic disruption caused by the COVID-19 pandemic.
In conclusion, investors may want The Fed to pivot towards easing in the hope that it will stimulate economic growth and support asset prices. However, it’s important to recognize that The Fed’s actions do not always have the desired effect on financial markets, and there are many other factors that can influence stock prices.
BUT. As an investor, there are a few things you can do while waiting for the Federal Reserve to pivot its monetary policy:
- Stay informed: Keep track of economic and market developments, as well as statements and actions by The Fed. This can help you understand the current economic environment and how The Fed might be considering changing its monetary policy.
- Diversify your portfolio: Consider spreading your investments across a range of asset classes and sectors, as this can help reduce risk and potentially provide more stable returns over time.
- Have a long-term investment horizon: The Fed’s pivot may have an immediate impact on financial markets, but it’s important to remember that the long-term prospects of investment are generally more important than short-term movements. By having a long-term investment horizon, you can potentially ride out any short-term market volatility caused by a pivot in The Fed’s monetary policy.
- Review your risk tolerance: Make sure that your investment portfolio is aligned with your risk tolerance and financial goals. If you are a risk-averse investor, you may want to allocate a larger portion of your portfolio to safer investments such as cash or bonds.
- Seek professional advice: If you are unsure about how to navigate the investment landscape, consider seeking the advice of a financial advisor or professional. They can provide personalized guidance based on your specific investment goals and risk tolerance.
The Misconceptions of a FED Pivot...Investors often want the Federal Reserve (also known as "The Fed") to pivot its monetary policy because it can potentially have a significant impact on financial markets. A pivot refers to a change in the direction of monetary policy, such as shifting from tightening (e.g., raising interest rates) to easing (e.g., lowering interest rates).
When The Fed pivots towards easing, it can signal to investors that it is willing to support economic growth and potentially stimulate asset prices. This can lead to increased demand for stocks and other riskier assets, as investors expect that these assets will benefit from the supportive monetary policy.
However, it's important to note that The Fed's pivot does not always have the intended effect on financial markets.
For example;
1. In 1986 , the Federal Reserve implemented a form of quantitative easing (QE) known as the Treasury-Fed Accord. This policy involved the Fed purchasing large amounts of U.S. Treasury securities in order to lower long-term interest rates and stimulate economic growth.
2. In 1989 , the Fed implemented another round of QE in response to a slowdown in economic growth. This time, the Fed focused on purchasing mortgage-backed securities in order to lower mortgage rates and support the housing market.
3. In 2000 , the Fed implemented QE in response to the dot-com bubble burst and the subsequent economic downturn. This policy involved the purchase of longer-term Treasury securities in order to lower longer-term interest rates and stimulate economic growth.
4. In 2007 , the Fed implemented QE in response to the global financial crisis. This policy involved the purchase of a variety of securities, including mortgage-backed securities and longer-term Treasury securities, in order to lower longer-term interest rates and stimulate economic growth.
5. In 2020 , The Fed pivoted towards a more accommodative stance in its monetary policy in response to the economic disruption caused by the COVID-19 pandemic.
In conclusion, investors may want The Fed to pivot towards easing in the hope that it will stimulate economic growth and support asset prices. However, it's important to recognize that The Fed's actions do not always have the desired effect on financial markets, and there are many other factors that can influence stock prices.
BUT .. As an investor, there are a few things you can do while waiting for the Federal Reserve (The Fed) to pivot its monetary policy:
- Stay informed: Keep track of economic and market developments, as well as statements and actions by The Fed. This can help you understand the current economic environment and how The Fed might be considering changing its monetary policy.
- Diversify your portfolio: Consider spreading your investments across a range of asset classes and sectors, as this can help reduce risk and potentially provide more stable returns over time.
- Have a long-term investment horizon: The Fed's pivot may have an immediate impact on financial markets, but it's important to remember that the long-term prospects of investment are generally more important than short-term movements. By having a long-term investment horizon, you can potentially ride out any short-term market volatility caused by a pivot in The Fed's monetary policy.
- Review your risk tolerance: Make sure that your investment portfolio is aligned with your risk tolerance and financial goals. If you are a risk-averse investor, you may want to allocate a larger portion of your portfolio to safer investments such as cash or bonds.
- Seek professional advice: If you are unsure about how to navigate the investment landscape, consider seeking the advice of a financial advisor or professional. They can provide personalized guidance based on your specific investment goals and risk tolerance.
Are the 2 and 10 year bond markets calling JPOW's bluff?In this video I cover the divergence between the 2 and 10 year treasuries and the recent FOMC press conference language. Jerome Powell is promising one thing (continued rate increases), while the bond market seems to be claiming otherwise (Fed pause incoming). Who's right? Let's take a closer look.