To The Moon

Major indexes like the SP500 and dow jones tanked by around 0.6% immediatly after Powell said 'rates are going to be higher than expected.' This is because the immeidate fear that people got was firstly, the recent 0.25% rate hike that we got from the FED might be short lived and the next rate hike might go back to 0.5% which will be bad for the market especially because some analyst were already saying the rate hike cycle could be over soon after that 0.25% hike. Secondly, people fear that the terminal rate will be hiked higher than previously priced in which was at around 5.1% but has now increased to 5.25%-5.5% range according to CME data. And lastly also because of investor behaviour whereby if i know this news is going to crash the market, I will sell and short also, thereby increasing the magnitude of the fall.

My analysis on the current situation is that nothing has really changed from last year. The narrative from the FED was the same, the same quote was quoted by main stream media over and over again where Jerome Powell would say they will not stop the hiking. This makes me believe that investors should already know that the rate hike is not going to stop soon. For today's case, the market has actually been up for the past 5 days by around 2.8% which indicates to me that people were actually made to believe that Jerome Powell would say something beneficial to the market during his speech today because the market narrative was that Powell would get backlash from commitees like the senate banking commitee and the housing financial service commitees among many others if he were to be too hawkish. This made people believed that Powell would be more dovish, hence the rise in stock prices before Powell's speech and the fall afterwards.

On a side note, i also believed that it was the big banks and hedge funds that wrote articles and market narrative to make smaller investors (including smaller funds) to believe in the narrative so that the big money could make an extra 2.8% on thier money before the speech.