Jerome Powell in his recent speech announced yet another delay in the rate cuts. The market has reacted as the hopes are shattered.
There has been a strong reaction from both the commodity and the global market after the recent speech of Jerome Powell.
The Current Scenario Of The Global Market
Global indices are trading at much better levels than earlier this week. Dow, however, has seen a slight downturn. S&P 500 and Nasdaq are trading in the upper levels and Russel 2000 which was beaten hard for a few days showed a growth of 0.5%. 10 years US Bond yield on the other hand is on elevated levels. During the last trading session, it rose up to 4.4% which showed a significant picture of confidence in the bond markets.
Jerome Powell gave a public speech yesterday stating that the Fed needs to be confident about inflation before thinking about rate cuts. In an earlier speech, he said there will be 3 rate cuts this year which emotionally charged the market about 2 weeks ago.
The US stock markets reached all-time highs after the Federal Reserve decided to stop cutting interest rates last year. The markets were highly optimistic, leading to a heightened sensitivity. The falling bond yields indicated that investors were anticipating a rate cut.
The Hopes In December Got Shattered Because Of Strong Market Data
In December, retail sales exceeded predictions of 0.4%, rising from 0.3% to 0.6%. The Fed’s focus is on controlling inflation rather than promoting growth. Based on current CPI and core CPI, it seems highly unlikely that the Fed will begin cutting rates any time soon
However, during the end of 2023, the reports from CNBC and Yahoo Finance suggest that most market experts predicted the Fed would begin cutting rates in Q4 of the 2023 financial year.
The commodity market, on the other hand, is in the blue sky zone. Gold is trading near a time high, and base metals like Copper and Almuniumn are trading on the higher levels.
How Soon Can the Market Expect Rate Cuts
However, due to strong market data, the likelihood of a rate cut in Q1 2024 began to decrease. Now as the market stands on the starting week of April. Experts believe that rate cuts will start around the end quarter of the calendar year 2024.
Employment data released recently gave positive signals which has also kept the central bank from reducing the policy rate. Chair Powell forecasted 3 rate cutes earlier and the market is already discounting it.
How will the Crypto Market React?
The crypto market is considered a riskier investment when compared to bonds and assets which means a regular investor who is risk averse will allocate the capital into crypto in the last. However, after the rate cut, the economy will boom, and as a result, the money will flow into the crypto market after equities and bonds.
Summary
Jerome Powell’s recent speech about the need for more confidence in inflation before deciding rate cuts has caused a significant reaction in both the commodity and global markets. Gold is trading near a time high and base metals like copper and aluminium are trading at higher levels.
Disclaimer
The views and opinions stated by the author or any people named in this article are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos, or other related indexes comes with a risk of monetary loss.
