Pay close attention to the dramatic changes in Fed members' expectations regarding interest rate hikes/cuts in the coming years ๐ฎ
This is what Fed members' forecasts look like
๐ด1 expects 3 hikes (compared to 0 in March)
๐ด5 expect 2 hikes (compared to 0)
๐ด3 expect 1 hike (compared to 0)
๐ต8 expect no change in interest rates (compared to 7)
๐ข1 expects 1 cut (compared to 7)
๐ข0 expect 2 cuts (compared to 2)
๐ข0 expect 3 cuts (compared to 2)
๐ข0 expect 4 cuts (compared to 1)
These are dramatic changes - the market is starting to price in the possibility of a significant interest rate hike! ๐ฉ
What does an interest rate hike mean for the markets? ๐
Pressure on stocks (especially technology):
High interest rates mean money becomes more expensive - growth companies will find it difficult to raise capital, which could lead to a wave of high volatility in the stock market. ๐
Is the safe alternative returning? ๐
When interest rates rise - yields on government bonds and deposits increase, large sums of money leave the market and move to a risk-free 'safe haven'. ๐
Dollar strengthening:
Expectations of high interest rates in the US attract foreign investors and strengthen the dollar globally (and against the shekel). ๐ต
โ๏ธ The bottom line:
The market understands that the era of 'cheap money' is not returning so quickly - if the Fed raises interest rates - we are entering a period of repricing - and now is the time to be vigilant. ๐