To The Moon

🎁Questions for Tigers🎁

• Do you think the impact of this rate hike will be more beneficial or more harmful?
• How will US stocks, Gold, Dollar, Bonds and other assets move after this decision?
• What's your target rate expectation for next Fed FOMC meetings?

Below are the Fed decision interpretation and major assets moves expectations in the future from the Tiger Trade analysis team, please feel free to leave comments and questions under the post.

Disclaimer: Investing carries risk, all information and comments in this post are for communication only, not for investing advice direcly.

1. Regarding the expectation of interest rate hike in 2023:

we believes that the result of the Fed’s interest rate hike this time is fully in line with expectations:

The Fed announced a rate hike of 25bps to 4.75%-5% in March 2023, in line with market expectations. The resolution statement stated that the U.S. banking industry is healthy and resilient, but many failures have dragged down growth. The Fed said "some additional policy tightening may be appropriate," removing language that continued rate hikes might be appropriate. The Federal Reserve lowered its forecast for U.S. GDP growth in 2023 to 0.4%, and is expected to increase by 0.5% in December, reiterating that it will not cut interest rates within the year.

Source: www.federalreserve.gov

Tiger analysis team believes that the focus of investors should be on the two FOMC Meetings in May and June this year.

Source: www.cmegroup.com

According to CME FedWatch Tool shows that on May 3rd，The probability of rate no change is 62.92%, and the probability of rate hike 25bps is 37.08%.

A dot plot forecast for interest rates released alongside the Fed's decision statement shows the Fed's end-2023 interest rate will be at 5.1%, suggesting that most officials expect only one more rate hike ahead - supported by 10 out of 18 officials.

Source:bloomberg

Forecasts for the next 2 years show considerable divergence among members, though the median forecast still sees the Fed cutting rates by 0.8% to 4.3% in 2024 and 1.2% to 3.1% in 2025.

Goldman's public investment business: the bank had chosen to downplay the importance of its latest "dot plot" and economic forecasts in such a rapidly changing environment as there was considerable uncertainty ahead. Congress may reconsider deposit insurance.

Principal Asset Management：Fed desperate for return of slowing inflation

Glenmede Private Wealth Investing: Fed dot plot not in line with expectations

Chicago Murphy & Sylvest Wealth Management: The Fed is still talking about raising rates, but the market sees it as a dovish statement

2. Changes & expectations of major asset prices after interest rate hikes:

• US dollar index falls to 6-week low

The dollar index $USD Index(USDindex.FOREX)$ fell toward 102 on Thursday, remaining under pressure near 7-week lows as the Fed dropped language about “ongoing increases” being needed and hinted at just one more rate rise.Future Expectaion: Wells Fargo analysts wrote in a research note that a "dovish rate hike" by the Fed should mean a lower dollar in the coming weeks and days, provided banks' liquidity problems remain subdued.

• US Stocks Tumbling Like an "accident"

Stocks closed broadly lower after theFed, The $DJIA(.DJI)$ fell 1.63%, the $S&P 500(.SPX)$ dropped 1.65% and the $NASDAQ(.IXIC)$ tumbling 1.6% on Wednesday trading, US stock futures stabilized on Thursday. 

The overnight plunge in U.S. stocks seems more like an "accident"—Speaking to a U.S. Senate subcommittee at the same time as Powell's press conference overnight, Yellen dismissed the possibility of a major increase in deposit insurance, saying U.S. regulators do not intend to provide "blanket" deposit insurance to stabilize U.S. banks system. The speech not only hit U.S. stocks hard, but also amplified the decline in U.S. bond yields that were already weakening.

• Bond Yields Fell Across the Board

The 2-year U.S. bond yield, which is most closely related to the Fed's interest rate expectations, plunged 24bps to 3.937%, falling back below the 4% mark. Known as the "anchor of global asset pricing," the 10-year U.S. bond yield also fell by 18.2bps to 3.44%.Future Forecast: Concerns that high interest rates may increase the risk of a crisis drove the FOMC to keep year-end forecasts of the funds rate unchanged at 5.1%. The bond market suggests that the tightening cycle is going to morph to an easing cycle at some point in the near future.

Blake B. Millard, Director of Investments,atSandbox_FP. Previously at UBS shared publickly on twitter: "Bond market had to catch up to the Fed, I have a feeling we’re gonna see a similar catch up move in rates in the coming weeks/months."

• Gold Moved Higher

Gold price$Gold - main 2304(GCmain)$ rose for 2 consecutive days on Wednesday &Thursday, and is now quoted at $1,978.2. On Monday, it broke through $2,000/ounce intraday , then pulled back till Tuesday. 

Gold has climbed more than 7% so far in March, fueled by worries around the banking and financial sectors largely fueled by rising interest rates. In times of financial instability, gold is often self-produced as a safe haven, Usually, it moves inversely proportional to the $USD Index(USDindex.FOREX)$ .

Future Forecast:

Goldman Sachs lastest forcast shows: "gold is poised to move higher, although it may be more of a slow grind from here. We introduce a new flat target forgold of $2050/toz over the coming 12 months."

Now the market is discussing that the Fed's rate hikes may not be ‘appropriate’. The senior VP of Bank of America New York Branch told TigerTrade:

The Fed's 25bps rate hike has already been priced in before the meeting. The current market anxiety is that the current Fed and the market are very different about the trajectory of interest rate changes in the rest of this year! No one on the Fed's dot plot expects to cut interest rates in the second half of 2023, while the CME futures market predicts that there is a certain probability of a 75-100 basis point rate cut in the second half of the year.

It is interesting that we can see Fed officials are bearish on rates for 2024, 25 years or longer...This interest rate hike seems to confirm the similar thinking of the Fed and the ECB that: to deal with inflation, continue to use rate hikes or run balance sheets off; to deal with financial instability, use other fancy tools in its toolbox...

🎁Questions for Tigers：

Do you think the impact of this rate hike will be more beneficial or harmful?

Every valid comment by March 30th 2023, will be rewarded 5 Tiger coins! Top 10 popular comments will recieve 10 Tiger coins.🎁