Many traders do not understand why the market suddenly crashed, so we need to clarify the source of the emotional shift:
On December 19, the Federal Reserve lowered interest rates by 25 basis points, which was in line with most people's expectations,
However, the positive news had already been digested by the market, and the focus was on the Federal Reserve's hawkish remarks.
The Federal Reserve has made a significant hawkish turn regarding its policy outlook for 2025, with the following three points:
The Federal Reserve has reduced its expectation for rate cuts in 2025 from 3 times to 2 times, totaling 50 basis points.
The core PCE inflation expectation for the end of 2025 has been raised from 2.1% to 2.5%.
The Federal Reserve expects the inflation rate at the end of 2026 to still be 2.1%, slightly above its target of 2.0%.
Powell has once again acknowledged that inflation in the U.S. remains a significant issue, and inflation is rising rapidly:
The 3-month annualized core CPI inflation rate has now risen to a concerning 4%.
Core PCE inflation trends are approaching 3.5% or higher, while PPI inflation is also rising.
Apart from Powell, most Federal Reserve officials believe there will be fewer than 3 rate cuts in 2025, and after the meeting, the dollar index soared to its highest point since November 2022, leading to a rapid shift in market sentiment.
As a result, the Dow Jones Index recorded its first consecutive 10-day decline since 1974, and BTC dropped from 100K to the current 93K. With the Federal Reserve's hawkish turn, 2025 may be the most volatile year in nearly a decade.
The world economy is showing different patterns, with the U.S. hoping to ease employment pressures through rate cuts, while China hopes to stimulate the economy through rate cuts and tax reductions. The U.S. and Europe face huge inflationary pressures, while China is facing a severe deflationary dilemma.
The level of chaos in the market in 2025 will far exceed traders' imagination.
There are still 10 parking spots in the village, only for those with fate!