Many traders do not understand why the market suddenly crashed, and here we need to organize the source of the emotional shift:

On December 19, the Federal Reserve lowered interest rates by 25 basis points, in line with most people's expectations,

However, the positive news had already been absorbed by the market, the focus is on the Federal Reserve's hawkish statements.

The Federal Reserve has made a significant hawkish shift in its policy outlook for 2025, with the following three points:

The Federal Reserve has reduced its expectations for interest rate cuts in 2025 from three times to two 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 reach 2.1%, slightly above its 2.0% target.

Powell once again acknowledged that inflation in the United States remains a significant issue, and inflation is rising rapidly:

The annualized core CPI inflation rate over three months has now risen to a concerning 4%.

Core PCE inflation trends are approaching 3.5% or higher, while PPI inflation is also on the rise.

Aside from Powell, most Federal Reserve officials believe that there will be fewer than three interest 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 Industrial Average set a record for its first consecutive 10-day decline since 1974, and BTC dropped from 100K to the current 93K. With the Federal Reserve's hawkish shift, 2025 may be the most volatile year in the last decade.

The world economy presents different patterns; the United States hopes to ease employment pressure through interest rate cuts, while China hopes to stimulate the economy through interest rate cuts and tax reductions. The United States and Europe face enormous inflationary pressures, but China is in a severe deflationary predicament.

The level of chaos in the market in 2025 will far exceed traders' imagination.