did the market react incorrectly to the recent Fed meeting?

[importedsteak]

The Fed meeting last Wednesday hinted at an increasingly dovish stance from Powell and his crew - at least that's how the market interpreted it. Just after the meeting concluded, both equites and crypto began to fly - posting solid green candle sticks through the weekly close. Market sentiment all of a sudden feels more bullish, as investors are beginning to speculate that the worst of the hawkish rate hikes may be coming soon if not over already.

Markets run on forward guidance, meaning they price in today what is expected to happen in the short-term future. But the market can also be wrong for unreasonable periods of time. Many people sat on the sidelines not understanding why these rallies have so much strength, both in stocks and crypto.

So the question is: has the market reacted incorrectly? In other words, is the market pumping too much to the point where the Fed will be forced to increase their hawkishness come next meeting? Employment numbers are still good, meaning the Fed theoretically could afford to scare the market even more.

[bittraffic]

Yes. The market may have reacted incorrectly. This may be because investors will move to BTC as their first choice in times of uncertainty and recession. Whether this bullish movement comes from Macro or not, they do understand how BTC works which they can pay anywhere almost for free without interruptions.

[adaseb]

All I understand is that if you look at the yields they topped a couple of months back. And many are assuming that the fed will raise rates only till end of 2022 and then they be flat or even cut rates. And this is mostly why the markets have rallied.

Unless there is some drastic changes like some major lockdowns I don’t see the stance changing. Most likely inflation is at a top and will go down from here and fed predicts in a year we will get 2% inflation which is ideal. So stocks and cryptos should keep on rallying.

[Poker Player]

The market does not act correctly or incorrectly. It is often irrational, as Newton said, but it does not have to act as we expect because there are always things that escape us.

Regarding the specific case you mention,

So the question is: has the market reacted incorrectly? In other words, is the market pumping too much to the point where the Fed will be forced to increase their hawkishness come next meeting? Employment numbers are still good, meaning the Fed theoretically could afford to scare the market even more.

What the Fed is trying to do is to tame inflation, which by raising rates risks having a negative impact on economic growth and stock markets, but for stock markets to rise if inflation can be curbed would be the best of both worlds.

[importedsteak]

Yes, but I understand the Fed's best shot at taming inflation is through eroding the wealth effect and killing off demand. So if the stock market continues to rise, that pokes a hole in their plan to curb inflation

What the Fed is trying to do is to tame inflation, which by raising rates risks having a negative impact on economic growth and stock markets, but for stock markets to rise if inflation can be curbed would be the best of both worlds.

[naira]

The Fed has great control over the global financial markets including the crypto market which is mainly focused on centralized exchanges. Thus the response was a bit aggressive in a short time but after that we returned to the worrying red line. Considered starting a bear market or simply as a saturation point for shareholders. The Fed reacts to an exaggerated market image. An increase in interest rates always triggers the market not on a normal scale, because finances are forced to withdraw to cover these costs. So sometimes the movement is erratic, it can run in a week or even a month. Look at the impact of the increase in interest rates last month which was somewhat more surprising and lasted quite a long time.

[Alisha-k]

This is just a means for the FED meeting, a hint on how the Dovish tends to tame inflation. The way the market reacts to this news is solely based on how the investors react to the wave of the news. The bull dive as been there for a number of days now., so far prices has stayed high for a couple of days and the hawkish rate hikes speculated is expected soon from all indications

[Smack That Ace]

Yes. The market may have reacted incorrectly. This may be because investors will move to BTC as their first choice in times of uncertainty and recession. Whether this bullish movement comes from Macro or not, they do understand how BTC works which they can pay anywhere almost for free without interruptions.

I don't think so, all US stock markets rallied after the Fed rate hike announcement, not just bitcoin. The fact that the market reacts against many previous predictions shows that the market is very fierce and everything is unpredictable. But today things seem to be back to the downside after a couple of days of bullishness, I think as long as the Fed keeps raising rates to fight inflation, we won't see a real green season any time soon.

[hugeblack]

you read it in reverse. The rise in stocks, especially high-risk assets include cryptos, means that the markets were not afraid of real economic problems that would push them away from high-risk investments, although I think that the recent rises are nothing but better than what was expected (the worst) and therefore It is difficult to say that the reserve will risk accelerating the recession by carrying out further monetary tightening.

[Hydrogen]

2022 is an election year in the united states. Gas prices are falling. Markets and bitcoin are rising. Voters will feel better about the state of the economy and their investments when casting votes. Its what happens after the election season is over, that will matter the most. If stability in markets and commodity prices can be maintained, that would be great. But there is a possibility that circumstances will degrade and deteriorate beyond what we have witnessed so far.

After Trump assumed the Presidency in 2016, the federal reserve recommended raising rates to prevent the economy from overheating. This raised a few eyebrows. The trend has only widened and deepened since then. Until we have reached a point where former fed chairman Janet Yellen is claiming the united states economy shows no indications of a recession. The federal reserve and its narratives on the US economy are becoming a type of arcane ritual. Its not easy to see where they're coming from.