Jerome Powell: Today, Jerome Powell (the FED's chairman) gave a speech on current economic conditions and the FED's efforts to reduce inflation through rate hikes and other monetary policies.
These speeches are always important because they can provide a lot of insight into what the FED is thinking and what they might do with upcoming rate hikes. These hikes can have a significant impact on markets, so any information about them can cause significant volatility:
- Some reversal in demand and spending following a period of softening.
- The Fed is prepared to raise interest rates further if data warrants it.
- Inflation will most likely continue, but at a slower pace.
- Data suggests that there won't be many rate hikes, but there will be more.
These were my main takeaways from today's speech, which, as you can see, is much more hawkish (aggressive) than dovish (conservative) (tentative). More hawkish means expecting more rate hikes rather than fewer, which is bad for markets because markets understand how much rate hikes can harm the economy.
However, based on recent data, I believe this was inevitable, as demand has been recovering, which poses a significant risk to markets in the long run because it can lead to even more rate hikes (to bring even higher inflation back down), and we could see stagflation (high inflation and unemployment ->
The worst-case scenario). So it's better to be aggressive now and be certain of getting it down than to wait and risk inflation.
This bear market would then spiral out of control, extending the bear market even further. Yields and the DXY: Yields (% collected on bonds) and the DXY (Index of the US dollar against other currencies) both rose today.
This was bad news for markets because yields and the DXY have an inverse relationship with the markets (Meaning that when 1 goes up, the other goes down). This had already begun in the early morning, but the Jerome Powell speech exacerbated the situation, sending markets even lower. #Binance #crypto2023 #buildtogether #kayabdul #profitclub