On December 19, news reported that the Federal Reserve announced a 25 basis point rate cut as expected on Wednesday, but significantly raised future policy rate expectations and inflation expectations, forecasting only two rate cuts totaling 50 basis points next year, halving previous expectations.
According to 4E monitoring, after the Federal Reserve's dot plot and economic outlook summary were released, risk aversion sentiment surged sharply, causing all three major U.S. stock indexes to decline. The S&P 500 index fell by 2.95%, the Dow Jones dropped by 2.58%, marking its longest losing streak since 1974 with ten consecutive days of decline, while the Nasdaq fell by 3.56%. Tesla dropped over 8%, leading the decline among tech giants. Cryptocurrency concept stocks generally declined, with MSTR down 9.52% and Coinbase down 10.2%.
The Federal Reserve has caused a collapse in the U.S. stock market, leading to a significant correction in the cryptocurrency market. BTC fell below $100,000, and Powell's statement that 'the Federal Reserve does not allow and has no intention of holding Bitcoin' intensified selling pressure in the market, resulting in a Bitcoin decline of up to 6.2%, reported at $99,235 at the time of writing. Ethereum briefly plunged to $3,542, with a decline of 7.27%, and altcoins generally experienced double-digit declines. In the past 24 hours, the total liquidation amount in the cryptocurrency market reached $842 million, deepening market panic.
In the forex commodities sector, the Federal Reserve has drastically cut interest rate cut expectations, causing the dollar index to rise over 1% to a two-year high; gold prices dropped over 1% to a one-month low; U.S. crude oil inventories decreased, pushing U.S. oil prices higher, but the slowing pace of rate cuts restrained oil demand prospects, leading oil prices to rise before gradually erasing gains.
The Federal Reserve's published 'dot plot' indicates that it is expected to cut rates only two more times by 2025, which is more hawkish than the September dot plot forecast, resulting in extreme fear in the market. Federal Reserve officials also expect two more rate cuts in 2026 and one more in 2027.
According to IG market strategist Yeap Jun Rong in a report, the trajectory of future interest rate cuts by the Federal Reserve may depend on the policies of President-elect Trump, which remain unclear at this stage. He noted that Trump's initial statements regarding tariffs sounded quite aggressive. However, he added that the extent of implementation of these measures is uncertain. Yeap stated that as policies become clearer, the Fed may initially lean towards a shallower rate cut cycle. He also mentioned that as the Federal Reserve meeting concludes, unless the Bank of Japan makes an unexpected decision, U.S. stock markets may gradually rise in the last few weeks of 2024. However, due to a lack of further catalysts, reaching new record highs by the end of the year may be challenging.
