Weekly Wins: U.S. stocks rallied after the Fed's decision. What happened?
Here is what happened on Wednesday in the U.S. stocks market.
The stock market was subdued ahead of the year-end FOMC meeting. In the late-day trading session, stocks rallied when the Fed statement came out, which injected faith into investors because it showed the determination to fight inflation without restraining economic growth.
Key takeaways - Hawkish talk, dovish action
1. Speed up tapering, on track to end bond buying mid-March
2. Keep the federal funds rate in a target range of 0% to 0.25%
3. Fed forecasts three rate hikes in 2022 and three more in 2023
4. Interest rates policies are closely related to employment data
Why did the market jump on the Fed's decision?
1. Traders have prepared for the worst. It could be an explanation to the rally on a Fed hawkish decision. Since the last Fed meeting, the market already expected hawkish decisions such as tapering speed up and interest hikes.
2. Federal Reserve Chairman Jerome Powell balanced his rates outlook with a positive outlook of the economy.
Key takeaways - Hawkish talk, dovish action
1. Speed up tapering, on track to end bond buying mid-March
2. Keep the federal funds rate in a target range of 0% to 0.25%
3. Fed forecasts three rate hikes in 2022 and three more in 2023
4. Interest rates policies are closely related to employment data
Why did the market jump on the Fed's decision?
1. Traders have prepared for the worst. It could be an explanation to the rally on a Fed hawkish decision. Since the last Fed meeting, the market already expected hawkish decisions such as tapering speed up and interest hikes.
2. Federal Reserve Chairman Jerome Powell balanced his rates outlook with a positive outlook of the economy.
3. Investors are somewhat encouraged by the Fed's recognition and determination to fight inflation.
“It seemed like there was some hedging demand into the event, perhaps relief that the event has happened, regardless of outcome,” said Danny Kirsch, head of options at Cornerstone Macro LLC. “The event is gone, sell your hedge and move on.”
The bottom line
Daily fluctuations of the stock markets are directly or indirectly affected by the changes in macroeconomic factors.
“It seemed like there was some hedging demand into the event, perhaps relief that the event has happened, regardless of outcome,” said Danny Kirsch, head of options at Cornerstone Macro LLC. “The event is gone, sell your hedge and move on.”
The bottom line
Daily fluctuations of the stock markets are directly or indirectly affected by the changes in macroeconomic factors.
Therefore, knowing more about the Federal Reserve is helpful for your trading. Click to access the free course:
[Weekly Wins]
For more investment knowledge and trends, welcome to Courses in the Community.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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mmHow : Should raise rates faster
HopeAlways : The moomoo Courses on why the Fed matters shows the importance of understanding how Fed decisions can affect the market. It is useful for investors to look closely at the Federal Reserve and its announcements to know its latest reading of the economy and the future course of its monetary policy strategy. In fact, investors look to the Fed for many reasons. The one with the most direct impact on investors is that the Fed controls key short term interest rates that can encourage or put the brakes on economic growth. The Fed's dual mandate requires it to do what it can to encourage minimal levels of unemployment without causing unmanageable levels of inflation in the financial system. The Fed does not want to tighten its monetary policy too prematurely and cause another economic downturn. As such, the Fed has to weigh its policy decisions carefully to assert its control over the economy. With the escalating inflation, the time has come now for the Fed to acknowledge the need to take action to head off a potential future threat. Lately, investors appear to be on the edge about the intention of the Fed for three rate hikes next year. Therefore, the Fed still needs to walk a fine line to reassure investors that it has its finger on the pulse of the economy. Otherwise, the recent market volatility could worsen. Thanks @moomoo Courses for holding this week's course on the Fed and its importance.
不理不理左不理 HopeAlways: Capitalism has to go as it’s a unsustainable model, IMHO. However, that’s the only model that we could rely on for prosperity. Fed has the power to control inflation but only minimally, to our dismal. I don’t know how this is going to go on for the next few decades.
Syuee : Thank you @moomoo Coursesfor the enriching courses so we can self-learn at our own pace, anywhere and anytime.
This week, there is no video tutorial for The Federal Reserve course. For the busy investors who wish to learn, they can opt for the audio version too. It’s attention-grabbing as the audio courses within the catalog spans from 2 minutes to 4 minutes only. I like the clean text interface with only white background chart. It is simple and easy to digest. I like it that you have kept the vital contents brief and straight to the point.
I appreciate that the course explains why the Federal funds rate matters. The course educates how the rate also influences short-term interest rates (Eg: home/auto loan, credit card) as lenders often set their rates based on the prime lending rate. In addition, you can also learn the Types of Monetary Policies (expansionary/contractionary) and the 3 Tools of Monetary Policy.
The actions that the Federal Reserve decides to take (or not to take) offer investors an insight into how healthy they believe the economy is performing. That is why many investors study the Fed and try to anticipate it’s actions.
Learning more about the Federal Reserve is definitely useful for our trading decisions. Thank you @moomoo Coursesfor making investing easier, interesting and not alone.
Syuee HopeAlways: Understanding and knowing what the Fed does is important knowledge for investors and it can also help with developing investment strategies.
VCSuccess HopeAlways: The course gives a clear explanation on the Fed and why it can have an impact on the market
Jeet Kune Do HopeAlways: Good writing, very helpful
HuatLady Syuee: Generally, it is important to learn more about the Federal Reserve's decisions and Moomoo Courses have effectively illustrated this point.
101767718 HopeAlways: Learning more about the Fed from the Moomoo courses. Now I understand better why it can affect the market so much
Moomoo LearnOP 101767718: Glad to be helpful~
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