On Wednesday the Federal Reserve raised its policy rate by 50 basis point as widely expected to a range of 4.25%-4.50% during its last policy meeting for 2022, bringing the borrowing costs to the highest level since 2007.
This is the seventh consecutive rate increase for 2022, following four straight 75 basis point hikes, marking the fastest pace over the past 40-years. Policy makers signalled in its economic projections that rates are going higher for longer in order monetary policy to be sufficiently restrictive to return inflation to its target of 2%.
The central bank sees at least another 75 basis points of hikes in 2023 with median rates reaching 5.1%, or a target range of 5%-5.25%, up from 4.6% median rate expected at the end of September. GDP growth projections were revised higher to 0.5% vs 0.2% for 2022 but lowered to 0.5% vs 1.2% for 2023. Inflation forecasts were also revised higher to 5.6% vs 5.4% for 2022 and 3.1% vs 2.8% for 2023.
In the press conference Fed Chair Jerome Powell indicated that the Fed’s policies are getting close to restrictive territory and that a rate cuts to 4.1% are likely in 2024, which is above the 3.9% previously projected.
Investors received some positive economic news on Tuesday as the latest U.S. CPI report showed inflation is slowing, raising expectations that the Fed might halt rate hikes in 2023. These expectations are now blown, and equity markets were on a wild roller-coaster over the past two trading sessions as worries the U.S. economy could fall into a recession are rising.
The U.S. benchmark index is on track to lock in its biggest yearly decline since the Global Financial Crisis in 2008 and the mildly hawkish surprise from the Fed is likely to temper investor’s expectations for a Christmas rally.
The current rebound has started showing clear signs of deterioration and over the past month the index has been trading sideways, fluctuating between 3,904 and 4,133 suggesting that the bulls are running out of steam.
A break below minor support of 3,904 is highly likely in our view and would confirm a small top reversal pattern. The potential downside target based on the anticipated breakout is 3,770; however, over the medium-term we believe the October low could be re-tested.
Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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