Stocks, precious metals, and cryptocurrencies rallied during the first month of the year, and market strategists are saying that markets could retract in the near future if the U.S. Federal Reserve keeps hiking rates and maintaining a broader tightening policy. In three days, on Feb. 1, 2023, the Federal Open Market Committee (FOMC) is set to convene. While the market expects rate cuts, some analysts think the Fed will continue raising the federal funds rate. Chris Vermeulen, the founder and chief investment officer of The Technical Traders, insists the S&P 500 is due to slide 37% lower than its current position.
Strategist Predicts Potential Market Correction as Powell’s Re-tightening of Financial Conditions is Anticipated
Markets are closely watching the next Federal Open Market Committee (FOMC) meeting, scheduled to occur on Wednesday, Feb. 1, three days from now. Last week, Bitcoin.com News reported on how investors are closely following the decision of Jerome Powell, the 16th chairman of the Federal Reserve. As the FOMC meeting approaches, discussions about the outcome have been widespread on social media.
A market strategist known as “The Carter” explained on Jan. 27 that “there will be blood on February 1,” referring to the turmoil that markets may face after Powell addresses the nation. While some investors are expecting a dovish Fed and possible rate cuts, Carter argues that Powell will instead continue to tighten and implement restrictive policy.
The analyst notes that Powell has previously referred to a “broader tightening project” in three stages: rapid hikes to reach a neutral rate, measured hikes to reach a “sufficiently restrictive” rate and staying at the terminal rate for some time. ‘U.S. Federal Reserve Chair Jerome Powell will re-tighten financial conditions by forcefully addressing rate cuts head-on,’ Carter stressed in a Twitter thread.
The strategist expects that the Fed chair will address this topic forcefully on Feb. 1 and shift the conversation towards how long the Fed needs to hold at the terminal rate and why. “Look for him to expand on the lessons of the 1970s,” Carter wrote. “Why the market continues to punch Powell in the face and not expect a counter-punch is beyond me. This is the craziest market set-up right here, right now. There will be blood on February 1.”
Expert Predicts 37% Drop in S&P 500, While Gold and Silver Set to Shine in Bearish Market
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