To The Moon

Fed delivered an expected 50bps rate hike Commentary indicated rates will stay higher for Longer!  December FOMC projections peg terminal rate in 2023 at 5.1% vs 4.6% in September.

The updated FOMC dot plot suggests a "higher for longer" approach, with no cuts in 2023.

The dot matrix shows that the terminal interest rate exceeds 5%.

Hawkish Fed !

① FOMC hiked target range for funds rate by 50 bps, taking it to 4.25-4.5%

② Interest rate forecast dots revised higher

③ Median dot now shows rates peaking at 5.125% late next yr, up 50bps from Sept

④ 17 of 19 FOMC members expected 5.125% or higher

⑤ The Commission will continue to reduce its holdings of US Treasuries, agency bonds and agency mortgage-backed securities.

Powell's Speech Key Points

① There is still some way to go before raising interest rates, and the subsequent monetary policy decisions will depend on the overall data to be released; Historical lessons strongly warn against premature policy relaxation and will persist until the task is completed.

② It is expected that inflation will drop sharply next year, but the starting point at the beginning of the year will be higher. Until we are sure that the inflation rate is close to 2%, we will not cut interest rates.

③ We are firmly committed to the goal of restoring the inflation rate to 2%, and continue to believe that the risk of inflation is on the upside.

④ Compared with last year, the US economy has slowed down significantly, the labor market is still very tense, the property market activity has weakened significantly, and the increase in interest rates has also put pressure on enterprises' fixed investment.

⑤ The policy of the Federal Reserve is approaching the level of fully restrictive interest rates, which must be maintained for a period of time.

Comments From Institutions:

Bill Ackerman, a hedge magnate:

The Fed's 2% inflation target is no longer credible. De-globalization, the transition to alternative energy, the need to pay workers more, lower-risk, shorter supply chains are all inflationary. The Fed cannot change its target now, but will likely do so in the future. The 3% inflation target of the Federal Reserve will be a better strategy for long-term growth. 

Source From Twitter

Dan Suzuki, Deputy Chief Investment Officer of Richard Bernstein Advisors, said:

"The US economic growth is expected to slow down, but interest rates will be further raised. This is not a good combination for the market. At present, the greater uncertainty in the market is economic growth, not the Federal Reserve."

Seema Shah, chief global strategist of Principal Asset Management, said:

The Federal Reserve is still very secretive about the possibility of economic recession. This sounded the death knell for the recent bear market rebound. The policy interest rate has been raised by 425 basis points this year alone, and will be further raised, and will not be lowered next year. All this information will finally make the market accept the inevitable reality of the US economic recession.

How the Market React?

Market pullback on FOMC raising terminal rate to 5.1%, however sellloff was tame duce to confirmation of slowers hikes. 

$DJIA(.DJI)$ -0.4% , $NASDAQ(.IXIC)$ -0.8%, $S&P 500(.SPX)$ -0.6%, 

After the announcement of the interest rate resolution, the yield of US bonds rose and fell, 10 yr US goverment yield at 3.5%.

And Dollar Index at 103.2 ,

Eenergy, Financial, Basic Materials sectors performed the worst, and Healthcare sector keep more stedy. Rate sensitive sector-technology stocks drops 0.76%. 

Data from https://finviz.com/

Will the Market welcome a Santa Clause Rally？

Is the current market out of bad luck?

Technically Observation, $S&P 500 (. SPX) $ jumped on 200 DMA on Tuesday after the CPI data and then retreated. On Wednesday, $S&P 500(.SPX)$ still above the short cycle MAs. The short side strength of the S&P 500 index is not as strong as that of October.

Welcome to Read: Quick Overview of SPX, IXIC, Russell 2000, Short & Mid-term Trend

Large cap stocks $Apple(AAPL)$ , $Alphabet(GOOG)$ and $Amazon.com(AMZN)$ are fluctuating at a low level, while $Microsoft(MSFT)$ seems came out of a short-term small bottom.

In the following period, do you think we are still likely to see a Santa Rally? 

In 2021, the last 15 days of the year did see S&P 500 rally.  

And before 2021, the Economic Times Pointed out  $S&P 500(.SPX)$ declined 6 out 10 times during last 15days of the year, and Nifty rallied 9 out of 10 times.

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