Michaël van de Poppe - 01 November 2022
This Wednesday, a new FOMC meeting!
Hey everyone and welcome to a new blog article!
The FOMC meeting will be this Wednesday. We expect the following: 75 bps.
Based on this expectation, markets try to anticipate. For example, some speculators take a position and others remove themselves from the market. We call this, ‘pricing in’.
If the bps is 75, this would mean that the market is neutral. In this case neutral means that there is lots of volatility (price movements), but there are no clear signals of a bear or bull market.
Is the actual rate hike 100 bps (higher than expected) then this will be very bearish for the markets. If the rate hike 50bps (lower than expected) then will be bullish for the markets.
As you understand by now, the FOMC meeting is very important as it determines the direction of the market for the upcoming period.
Also interesting to know is that last week, some policymakers indicated that they disagree with the level and pace of the rate hike. They think the rate hikes are going too fast, and therefore the economy cant handle the rate hikes. There is a small chance that the FED will choose for a 50 bps rate hike, because a 75 bps rate hike will be too hard to handle for the economy.
In a macroeconomic downtrend, where money is taken out of the market, all markets trend toward each other. This means that equities, commodities and crypto will all react in exactly the same way. The common denominator is global liquidity. If liquidity (i.e. money supply in the economic system) decreases, markets trend downward, if liquidity increases, markets will have a positive impulse.
As Crypto investors anticipate this reversal in liquidity, because this means the switch from bear market to bull market.
For now, the most important thing to understand is that we want to see the economy getting worse. Because then it's more likely that policies will finally change. And therefore we will improve the economy, and people will invest again in assets like crypto.
See you Wednesday!