S&P500 could fall to 3,500 before Fed softens its approach
The Fed raised the rate by 75 points, something it has not done in 28 years. Such a move had already been priced in. In fact, on the eve of the announcement, the markets had even factored a small probability of a 100-point move.
The Fed did not go against the markets but did not add fuel to the expectations, creating a “sell the facts” reaction. However, there are considerable doubts about the sustainability of yesterday’s rebound in equities and the Dollar’s retreat.
In trading in Europe, the Dollar largely regained its losses after the FOMC, and the equity market erased the rebound. Today’s market reaction looks like a prologue to further downward impulse in the coming days, justified by tighter financial conditions from the world’s biggest central banks and worsening macroeconomic forecasts.
Thus, the Fed raised its year-end forecast for the unemployment rate to 3.7%, ruling out a further decline from current levels.
