Markets Are Hitting All Time Highs! The Fed Reveals What’s Next!

Soon the Federal Reserve will lower Interest rates and the markets will go Parabolic or will they last week fed Chairman Jerome Powell revealed that the Central Bank isn't rushing to cut Interest rates I don't think it's likely That the committee will reach a level of Confidence by the time of the March Meeting now markets initially crashed on This news but quickly recovered and some Stock indices have since hit new All-time highs so this begs the question Of what is going on with the markets What the FED will decide and what Effects it will have today we're going To give you the answers this is a video You cannot afford to Miss let's start with a quick bit of Background in the spring of 2022 central Banks around the world started raising Interest rates in a bid to combat Inflation which had been surging by that Point this caused the markets to crash Though there were other factors involved For some asset classes like FTX for Crypto in any case by the spring of 2023 It looked like inflation was starting to Come down at least according to the Official statistics this led to Expectations from investors that the FED Would lower interest rates because the Markets are forward-looking asset prices Started adjusting to these future Expectations initially the FED made it

Clear that it would not be cutting into Interest rates anytime soon since Inflation was still far above its 2% Target by March 2023 however the fed's Tone had changed slightly that's because Of the banking crisis which occurred at That time a crisis caused by losses Associated with higher interest rates You can learn more about exactly what Happened there using the link in the Description I Digress now after the banking crisis the Fed set up a new facility called the Bank term funding program or btfp which Basically allowed Banks to borrow extra Money this facility along with the Treasury Department spending money from The US government's bank account Resulted in more money being created the Practical effect of this was that it Caused markets to rise particularly risk Assets like crypto which are sensitive To changes in liquidity which Essentially means money in the economy The result was that most assets had Recovered most of their losses by the End of 2023 despite the FED keeping Interest rates high and it wasn't just The increase in liquidity either in the Summer of 2023 the FED effectively Paused meaning that it stopped raising Interest rates for context every fed Pause has historically been followed by Aggressive rate cuts a few months later

Usually in response to some economic or Financial crisis naturally this Historical fact caused the markets to Rally because investors immediately Started pricing in these future rate Cuts there was just one problem however Long-term interest rates had started to Rise for reference the FED mostly Influences short-term interest rates by Adjusting the overnight lending rate Long-term interest rates are more driven By the markets specifically the market For US Government debt aka the bond Market for those unfamiliar bond prices Determine the yield on bonds the higher The bond price the lower the yield and Vice versa in the summer of 2023 bond Prices started falling as a result Long-term interest rates started to rise And assets particularly risk assets Started to fall this phen nominent Continued until October when the yield On the 10-year bond or rather the 10-year treasury hit a multi-year high Of over 5% and it's actually not clear What caused this the consensus seems to Be a combination of inflation plus the Supply of bonds being issued by the Treasury this makes sense considering That bond yields started to fall when Inflation printed lower in November and Especially when the treasury announced It would be issuing less long-term debt Of course another factor that affects

Bond yields is future interest rate Expectations which once again fell in December when the FED revealed that it Expects multiple rate Cuts this year and Chairman Jerome Powell made doish Statements that is statements which Implied that interest rates will fall Soon as you've probably heard or seen The consequence of all of this was that It pushed stock market indices to All-time highs and caused a massive Rally in some risk assets like crypto Now this seems to have upset the FED Because Jerome's tone was much more Hawkish at its most recent press Conference and by the way if you're Enjoying the video so far be sure to Smash that like button to give it a Boost yes the year 1964 has begun and to Commemorate the new year we asked some Young people how they think the future Will look in 60 years's time what will The world be like in the year 2024 there'll be so many people that They have to have an overflow into the Sea I think whenever we have a question We'll just ask a computer and it will Tell us the answer uh everyone will have Their own flying car and they'll just be Flying around all over the place or I May be it's funeral of a Computer I don't think there'll be Politicians or anything like that I Think there'll be monkeys and they'll be

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Binder of secret documents cleared his Throat and began to speak He started by saying that the FED is Still focused on its dual mandate that Means keeping inflation at around 2% and Unemployment at around 4% by adjusting Interest rates FYI Jerome then said it's Good that inflation has come down but it Has not yet hit the fed's 2% Target Notably he mentioned that the FED is Still committed to the 2% Target this is Notable because there has been Speculation that the FED will accept a Higher interest rate in the future 2% Apparently has no real basis Jerome then Said that the FED decided to keep Interest rates where they are while Continuing to sell assets from its Balance sheet now this is also notable Because there had been speculation that The FED would stop Selling these Assets in question are Mostly bonds so this selling is slightly Increasing long-term rates with all that Info out of the way Jerome proceeded to Provide a breakdown of Economic and Inflation data he noted that the US Economy remains strong as per official Statistics that unemployment remains low As per official statistics and that Inflation continues to fall as per Official statistics but isn't at the 2% Target yet you can learn more about why These official statistics are incorrect

Using the link in the description moving On anyways following these statistics Jerome reiterated that the FED needs Quote more evidence that inflation is Coming back down to its 2% Target this Is significant because the FED has been Saying for months that it needs more Evidence all while more evidence has Duly been coming in more on that later Now Jerome in his ramblings about Inflation being too high to cut interest Rates threw a bone to the Bulls by Saying quote the policy rate is likely At its peak in other words we will Likely not raise interest rates any Further than this this means that There's only one direction they can go And that is down as a cherry on top Jerome said that it will likely be Appropriate to lower interest rates Sometime later this year but warned that This is not yet certain it's possible That it will take longer for inflation To fall to the fed's 2% Target in which Case the FED would have to keep interest Rates at 5.5% for much longer more Importantly Jerome revealed that the FED Is still afraid of the possibility that Lowering interest rates too soon would Cause a Resurgence in inflation this Makes sense given that the FED risks Repeating the same mistakes it made in The 1970s which caused a second wave of Inflation during that decade in closing

Jerome stressed that the FED is Committed to Bringing inflation back Down to its 2% Target and acknowledged That the combination of inflation and High interest rates has caused hardship For consumers and businesses it'll be Interesting to see what he says if a Recession comes around anywh who once Jerome was finished with his speech the Question period began the first reporter To ask questions was from the New York Times They asked Jerome how much more Evidence the FED needs to see that Inflation is coming down down before They cut interest rates all Jerome could Say is that the FED needs More the second reporter was from the Wall Street Journal they asked Jerome Why rates are so high when the Fed was Initially raising them in response to Inflation risks they were worried about Which are no longer present Jerome again Said that the FED needs to be more Confident before cutting the third Reporter was from Reuters they asked Jerome about something he said many Times before and that's that the FED Would start to cut before inflation hit 2% if they saw it was coming down Jerome Once again said they need to see more Inflation data to be confident to cut The fourth reporter was from the Financial times and they asked Jerome What the threshold for this confidence

Is Jerome said there's a variety of Views among the FED staff this was a bit Of a silly answer given given that the FED chairman apparently has the final Say on the fed's interest rate Decisions the fifth reporter was from The Washington Post they asked Jerome If The Fed is watching realtime indicators Of Economic and inflation data Jerome Dodged the question and he didn't do a Good job of it either he started Mumbling and bumbling on about the Pandemic supply chain issues as a Noto Fun fact the FED makes its interest rate Decisions based on lagging indicator Like the CPI and the pce Once Upon a Time these were the only indicators Available but in the modern day there Are ways to track things like inflation In real time true inflation is one such Tool and we'll leave a link in the Description now the sixth reporter was From CNBC they asked Jerome how much the Economy is really being restrained by Interest rates given that all the Economic data continues to come in Strong Jerome started by saying that Housing is being restrained before again Bumbling on about Supply chains the Seventh reporter was from Bloomberg and They asked Jerome if the labor market is Returning to normal that is are more People participating in the workforce Jerome said that it's still coming back

To normal this is an understatement Given that the unemployment rate is at Historic lows some would say that's a Precursor to an equally historic spike In unemployment anyhow the eighth Reporter was from the Associated Press They asked Jerome if there's a risk that Inflation could Rise Again Jerome said Yes but that the even bigger risk is That inflation could get stuck somewhere Above 2% presumably because this would Force the FED to adjust its Target What's spooky is that Jerome also said Something along the lines of we've had 6 Months of inflation coming down what's It going to take to get that last leg Low lower down to 2% I don't think we Want to find out now he didn't say that That's just our answer to his open Question now the ninth reporter was from Bloomberg they asked Jerome whether There's the possibility of a hard Landing AKA a recession a logical Follow-up question to Jerome's own Question Jerome seemed to shrug off the Possibility by saying that economic Growth is still strong the 10th reporter Was from Fox Business and they asked Jerome If the Fed will only cut rates Once or start a new rate cutting cycle When the cuts eventually come around Jerome said that it fundamentally Depends on the data underscoring the Fact that the FED is still data

Dependent and recall this data lags next The 11th reporter was from Politico they Asked Jerome to talk more about how Productive the US economy has been Lately Jerome struggled to come up with A convincing answer he spent quite a bit Of time talking about AI the 12th reporter was from Marketplace they asked Jerome If the Fed Is watching housing prices which Continue to hit new highs in many Regions despite High rates Jerome said That the FED doesn't Target the housing Market which is odd given that he once Said something to the effect that it did The 13th reporter was from axios they Asked Jerome If the Fed discussed the Continued sales of assets from its Balance sheet you'll recall that there Was speculation that they would stop or Reduce this this question took Jerome by Surprise he said this discussion won't Happen until March well we'll see what The minutes of the fed's most recent Meeting have to say about that when They're published now to their credit The axios reporter followed up with a Question that's been making the rounds In many macro circles and that's whether The FED would ever start cutting rates While continuing to sell assets Something it has historically never done Jerome confirmed that yes they could do This so if there are any hardcore macro

Analysts in the crowd with that question Well there's your answer now the 14th Reporter was from The Economist they Pointed out that Jerome had implied that There would be no rate Cuts in March Which in turn implies that eight months Of inflation data won't be enough they Asked Jerome how much more data the FED Needs and you already know what he said We need more Sorry anyway the 15th reporter to ask Questions was from market news they Asked Jerome about the FED selling Assets from its balance sheet Jerome Repeated that this is something they Will be discussing in March it just goes To show you how important it is to pay Pay attention particularly at a Fed Press Conference now the 16th reporter was From market watch and they asked Jerome About whether he's at all concerned About being nominated for a third term Jerome insisted that he's not concerned About that even though it could have Been the reason why he said inflation Was transitory in 2021 the 17th reporter was from Yahoo Finance they asked Jerome what will Happen if inflation gets stuck around Current levels I.E above the fed's 2% Target interestingly Jerome didn't Answer this instead he said that if Inflation Falls faster the FED will cut

Faster interesting indeed now the 18th Reporter was from Aon France press and This is the first time we've seen them At one of these fed press Conferences they asked Jerome about Consumer confidence which is abnormally Weak despite the strong economy Jerome Said yes it is strange and then refused To elaborate further it's safe to say That weak consumer confidence is a Contrarian indicator here now the 19th Reporter was from CNN business and they Were so incoherent that even Jerome was Wondering what they were asking it seems They asked him whether the FED speaks With businesses Jerome said yes and the Word on the ground was that everything Is going just Fine Right now the final reporter was from CNBC they asked Jerome whether the FED Is concerned about a strong economy Keeping inflation higher for longer Jerome said the FED isn't concerned About this which is again odd Considering that he said stuff to the Contrary in past press conferences so This brings me to the big question and That's what all this means for the Markets you'd be forgiven for thinking That the answer was was revealed at the Beginning of this video to refresh your Memory the markets initially dipped in Response to Jerome's hawkishness before

Soaring to new all-time highs now Believe it or not but the answer could Have absolutely nothing to do with the FED to be clear it's common sense that Interest rates affect the markets the Lower that interest rates go the more Money can be borrowed this eventually Means more investment in the economy and In the markets as we explained earlier However there are two types of interest Rates at play here short-term interest Rates which are influenced primarily by The fed and longterm interest rates Which are influenced primarily by the Bond market at least in theory in Practice the treasury has a big Influence on Bonds that's simply because it's the Treasury that decides what the supply of Bonds will be as some of you might have Heard the treasury has been issuing Shorter duration bonds instead of long Longer duration bonds and this has had The Practical effect of keeping Long-term bond yields lower than they Should be and as some of you may have Noticed it seems that it's the longer Term interest rates that have been Affecting the markets the most and Particularly the yield on the 10-year Treasury this makes sense considering That there's a very high chance that the FED will start cutting short-term rates It's in longer term interest rates where

The uncertainty lies however and there's Nothing that investors hate more than Uncertainty that said though the bond Market isn't completely in the dark That's because the treasury announces What durations of bonds it will issue Every quarter this announcement is aply Titled the quarterly refinancing Announcement or qra and you can think of This as being like the FED press Conference for longer term interest Rates and as it so happens the Treasury's latest qra took place on the Same day as the fed's press conference And it caused bond yields to fall the Volatility in stocks we saw on that day Was therefore a reflection of two Conflicting signals hawkishness by the Fed and de facto doish by the treasury Now given that the FED is very likely to Cut rates by Jerome's own admission Pushing back those rate Cuts was quickly Digested by the markets and this ties Into something we touched on earlier and That's the fact that the FED doesn't Seem to be satisfied with the evidence That inflation is coming down from our Perspective it's possible that what the FED is looking for isn't more inflation Prints but less fiscal policy less Government spending in other words case In point Jerome recently admitted for The first time that the US government is On an unsustainable fiscal path now this

Is a big deal because he has has Outright refused to comment on fiscal Policy in the past this sudden 180 Suggests that he knows government Spending is keeping inflation above 2% So what does this all mean for the Markets well in short they're going to Continue to be pushed back and forth by The opposing effects that the fed and The treasury are having on interest Rates and on liquidity if the man who Predicted everything is right the Treasury will win and markets will keep Rallying and you can learn more about Him using the link in the Description okay that's all for today's Video folks so if you learned something New let us know by Smashing that like Button if you want to keep learning be Sure to subscribe to the channel and Ping that notification Bell if you want To help others learn take a second to Share this video with them if you happen To be into crypto then you need to check Out the coin Bureau deals page because It's got trading fee discounts of up to 60% and sign up bonuses of up to $50,000 on the best crypto exchanges as Well as the biggest discounts on the Best hardware wallets and much more Besides these deals are only available To the viewers of this Channel and They'll only be around for a limited Time so take advantage of them using the

Link in the description ASAP as always thank you so much for Watching and I'll see you in the next One this is Guy signing Off [Music]

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