Inflation. That’s the main focus for today’s Federal Reserve meeting. Many believe it is out of control, while equity and credit markets have lost confidence in the Fed. Here is what we’re looking for in today’s meeting.

75 BPS rate hike

Analysts at HSBC believe the Fed will launch three series of 50 bps rate hike in June, July, and September, global investment bankers like Barclays and Jefferies make the case for 75 bps rise in interest rates. However, if the US Fed raises the benchmark rate by 75 bps, it would be the biggest hike seen since 1994.

Analysts fear this would ultimately unsettle global investors and fuel steep declines in the US equity as well as bond markets.

Since rates starting rising in January, the tech-heavy NASDAQ Composite has bled the most, sinking over 31% so far in 2022. Meanwhile, the S&P 500 and Dow Jones have slipped over 21% and 16%, respectively, during the same period.

Growth fears

Besides an extension to the current market sell-off, growth would take an even larger hit if interest rates rise dramatically. Cathie Woods ARKK has been a good indication of how far growth stocks have fallen. ARKK started the year at about $95 but has fallen to $37. This price is near pandemic lows.

Choppy markets today

Expect choppy conditions for any day trades in the lead up to the meeting. Volatility will also follow the chop when the meeting starts in the afternoon. Large moves on the S&P500 and NASDAQ could prove profitable for daily calls and puts, if the direction is in your favour. But many see this as more of a gamble due to the uncertainty of the outcome. Wednesday close could be a time to re-analyse your portfolio and see if further hedges need to be made to cover long positions.

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  1. […] A fall below $1.60 could be a sign of a reversal in trend, so that is an area for a stop. The FOMC meeting is later today, so there could be some choppiness in the lead up to that. Look for dips to […]

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