Today is going to be a very important day for the global financial markets as we have the Federal Open Market Committee (FOMC) press conference scheduled for 19:00 GMT today where the Federal Reserve is expected to provide an update on its monetary policy stance and actions going forward.

Markets are currently pricing in 4 rate hikes for this year, with the first one starting in March. Investors are also worried about the Fed signalling its plan to begin its Quantitative Tightening (QT) program potentially soon after the first rate hike is completed. Such a short gap between the conclusion of the Quantitative Easing cycle and the beginning of the QT cycle would be an unprecedented one as the last time around when the Fed was moving from and expansionary to a contractionary stance, the markets and the economy had few years of a gap between these two completely opposing monetary policy cycles in order to prepare and adjust accordingly.

However, we believe that the Fed will try to calm the brutal sell-off that we have seen in equity, bond and crypto markets throughout the last few weeks with a more dovish stance during todays meeting. The Fed has a great track of letting the market do their job for them, or in other words letting economic, monetary and market conditions adjust by affecting and altering investors expectations about how aggressive and/or defensive the Fed is going to be in the future. As we know investors expectations usually tend to overextend and overshoot both in good and bad times, which in turn creates tremendous trading and investing opportunities for those who can see the bigger picture.

At the same time despite moving from a growth mandate to a price mandate late last year, the Fed is not willing to let the markets fall with 30, 40 or 50%, thus creating a massive economic recession, as the Fed understands very well that an economic recession at a time of all-time high levels of personal, business and government indebtedness is the last thing that they want.

To summarise it all for you the team at Dow Experts Finance expects the following developments and announcements from today’s FOMC meeting:
➡️1. Jerome Powell will confirm that the first rate hike of 0.25 bps will come in March
➡️2. He will also confirm that the tapering of the QE program that the Fed initiated last Fall will be entirely concluded in March.
➡️3. He will talk about the fact that more rate hikes will be needed this year, if inflation continues to persist, but that the Fed will have a rather gradual approach to that matter and will continue to be data-driven, relying on the economic reports on inflation, growth, productivity and labor force participation.
➡️4. He will make it clear that Quantitative Tightening (QT) is a powerful monetary policy tool that the Fed plans to use in a gradual way in the future but only when the economic conditions are right for that as they would not want to create another 2018 taper tantrum scenario.
➡️5. Such comments and remarks would ease all of the negativity, fear and bearishness in the financial markets and would result in a broad rally for risk-on assets.

This is the reason why we have recently made some adjustments to our corporate investment portfolio, which you can follow and copy for FREE on eToro, and have put some of our previously raised cash to work.

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