Today's market conditions resemble the 2020 pre-bull market stage, where economic factors contribute to possible Fed action.
Given economic risks, the Federal Reserve has signaled possible rate cuts and quantitative easing.
Experts are comparing the current situation with the previous year and expecting the market to bounce back in 2024.
The market is repeating a similar trend from the past that involves a correction phase, which investors consider alarming. The deteriorating economic climate has caused recent declines and concerns about job reports and the overall slowing in the U.S. economy. This is similar to 2020, when the market crashed due to COVID-19 and subsequent economic impact.
At that time, the U. S. Federal Reserve acted to reduce its interest rates. It embarked on a policy known as quantitative easing, which aimed at increasing the money in the economy to avoid its complete failure.The outcome of these actions in 2020 was significant: a recovery that will allow for a continued bull market into 2021.
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Markets recovered powerfully, and the investors who had invested during the economic recession's comeback enjoyed significant profits. With similar economic fears circulating and the Fed signaling potential rate cuts and another round of quantitative easing, the question arises: Is it possible that we are now at the precipice of another large-scale rally?
Economic Fear and Fed Response
The market has recently made a bearish turn and has been described to be in a correction mode. Investors are awaiting evidence that the economy is weakening, including employment statistics and GDP. For such reasons as we saw in 2020, they have made investors shift to a cautious approach given the prevailing levels of uncertainty.
In response, the Federal government has strongly alluded that it will seek to reduce its interest rates soon. This policy instrument, intended to reduce the cost of borrowing to boost economic activities, is again expected to help stabilize the markets.
A Potential Setup for 2024?
As for the future, many analysts have already compared the present market situation with the pre-bull phase of 2020. Amid economic concerns, and given that the Fed can and will undoubtedly cut rates and otherwise act to prop up the market, there is increasing belief that such market recovery may be on tap for 2024 as the market did recover following the setback of 2020, for instance.
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