If you're struggling to understand why the markets are bearish after yesterday's FOMC meeting, then this article is for you

If you're struggling to understand why the markets are bearish after yesterday's FOMC meeting, then this article is for you. 

Inflation Data came in better than expected this month which led to a short rally in the crypto space. This added to the confluence of the FED possibly lowering their interest rate hike from 75BPS to 50BPS, which indeed, is what happened. 

So why are markets not rallying? Everything played out as expected, right?

Well, not necessarily. Apart from the obvious trading opportunity of "Buy the rumour, Sell the news" that occured with a dump occurring right before Powell started speaking, we have to look into what the markets are ACTUALLY looking at to decide whether the news is enough to support a healthy bull run. 

Remember, we are not in normal circumstances. We're deep down into a bear market and any false rally could end up bringing more pain. Traders and investors want to have an indication that the path is clear in order to sustain a healthy bull run and start a new cycle. 

One may think that the recent data is showing that we are on the way there, but in truth, we're not just there yet. 

THIS is what made the markets hesitant.

You can find the link to these projections from yesterday's FOMC meeting

This statistic involves the FOMC participants assessment of where they think the federal funds rate should be in 2023, 2024, 2025 and further on. As you can see, ALL members of the FOMC believe that we will NOT see any rate cuts in 2023. With the majority thinking that we will start seeing rate cuts in 2024. This means that we still have AT LEAST, one FULL year of high interest rates in 2023, which is not something the market wanted to hear at this stage. 

Does this mean we won't see any rally in 2023?

Not necessarily, this data is speculative and could change when there is more confirmation that inflation is in fact going down to 2% at a steady rate. However, at this point in time - that path is not set in stone just yet. Therefore, the markets have decided to remain cautious and thread lightly for the next couple of months. The next meeting will be at the end of January/Beginning of February and it is highly likely that the markets will move sideways till then to see if the opinions of any members has changed with more inflation data on the way. 

What are your thoughts on this?

Are you still bearish, bullish or neutral?

Let me know down in the comments!

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