To The Moon

The Fed has rapidly raised interest rates over the past year in a bid to beat back inflation, at a pace not seen since the 1980s😓😓😓 The rapid rise in rates after years of cheap money is rippling through global markets & the banking sector ➡️ Guess this is the “expected 🔪PAIN🔪” that Powell has been talking about❓

Things have quickly turned & escalated since Powell’s testimonial on 8/3, just 13 days ago. As someone who follows the market closely, it sure felt way longer than 2 weeks so many events & volatility in the market everyday😅

🚨 With the 🇺🇸 & European 🏦🏦🏦 crisis wreaking havoc in global markets, some financial industry executives are calling on the Fed to pause its monetary policy tightening for now but be ready to resume raising rates later.

However, would Fed really pause🤔❓Let’s remind ourselves on the 🔑 points & how Powell ended his testimony🎤

🔑 Powell indicated strongly that interest rates are heading higher than previously believed as inflation data for recent months have been uncomfortably high & because the economy continues to show signs of strong growth.

🔑 The Fed believes that the terminal rate for interest rates (where the Fed) will stop raising rates, might be higher than the current projected stopping point of 5.25%-5.50%🐻🐻🐻

‼️Powell’s Conclusion: “The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done…To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Federal Reserve will do everything we can to achieve our maximum-employment and price-stability goals.”

⚠️⚠️⚠️ As interest rates increase, the risk of a recession rises. Powell acknowledged that higher rates would bring higher unemployment. He explained that near-term economic pain is necessary for long-term prosperity.

‼️ Powell’s testimony elicited an immediate market reaction. The interest rate futures market increased the probability of a 50bps rate hike to over 65%. This is a much more aggressive stance than the previously anticipated 0.25% increase. And the futures market said the terminal rate for interest rates will be over 5.6%.

🚨 The European Central Bank raising rates by 50bps earlier this week DESPITE the Credit Suisse crisis❗️

‼️ Fed officials are in their pre-meeting blackout period, during which they are barred from commenting on monetary policy or the economic outlook🤐🤐🤐 But markets are hopeful & optimistic as can be seen from last night’s rally (20/3), which had a positive overflow effect to the Asia-Pacific markets today.

⭐️⭐️⭐️ Prices of Fed funds futures reflected a roughly 70% probability of a 25bps rate hike on 20/3 (Mon) versus about a 30% chance of no change, a slight firming in expectations compared to the end of last week.

🤔💭Rate Pause or 25bps On 22/3 & How Do We Trade❓

⭐️ To be honest, both options are absolutely possible & regardless whether the Fed raise this month or pause month & raise the next few meetings, the eventual outcome aren’t going to change much in the sense that more troubles are coming for the economy with increased recession-risks⛈🌪🌊

⭐️ Pausing the rate now would mean that the stock markets will go flying off & I’m not sure that is what the Fed wants right now when inflation is still running 🔥 at 5.4% by the Fed's preferred measures, far above the 2%🎯 rate.

⭐️ The Fed has also been shown earlier this week that the European Central Bank could still calm fears about financial stability with a 50bps increase, with additional backstop interventions, so I’m leaning more to the fact that it’ll be a 25bps hike.

🚨 I expect the Fed to lift its projection for the terminal rate for interest rates than the current projected stopping point of 5.25%-5.50%🐻🐻🐻 & this should send the stock market🌀🌀🌀📉📉

⭐️ I think 50bps is 99% off the table as I don’t think Fed wants more emergency meetings on Sundays😂

⭐️ If Fed raises by the expected 25bps, I’ll monitor the market response & react accordingly💪💪💪 Remember to always buy undervalued quality companies with a strong ⚖️balance sheet & 👍 management team who’re wise at controlling costs & increasing profits like AAPL & MSFT, so that even if the market crashes💥💥💥 we won’t be too deep in the red🩸🩸🩸 & recovery is more/less assured😉

🚨 If the Fed pauses contrary to my inclination, I’ll just let the market fly high & profit take before the next storm⛈🌪🌊 & secure cash to buy the next dip😉

🚨🚨🚨 Fellow 🐯🐯🐯, remember not to FOMO, a pause means NOTHING…because inflation is still 5.4% far away from the Fed’s 2%🎯‼️

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