Bearish Price Targets: $SPY 310, Oil $65, Bitcoin $12,000
The Fed is expected to fire off another three-quarter point rate hike — its third in a row.
It will also release quarterly forecasts for inflation, the economy, and the future path of interest rates Wednesday at 2 p.m. ET.
Fed Chair Jerome Powell speaks at 2:30 p.m. ET, and he is expected to emphasize the central bank will do what it takes to fight inflation and it is unlikely to reverse its rate hikes anytime soon.
“I think he puts up a bulletin board behind him that says ‘Inflation Has to Come Down,’” said Rick Rieder, BlackRock chief investment officer for global fixed income. “I think he’s going to talk tough.”
“It’s not what they do, it’s what they say. This is our first actual tightening road map. We had theoretical road maps up until now, but from the Fed’s point of view they’re crossing into a world of tightening. That’s an important thing,” said Diane Swonk, chief economist at KPMG.
The Fed has been lifting rates for seven months now, and will now be moving its target rate above what had been considered the neutral zone when inflation was low.
Neutral is considered to be the interest rate level where Fed policy is no longer easy but not yet restrictive.
The Fed has considered 2.5% to be neutral, and if it raises by three-quarters of a point, the fed funds rate will be in a range of 3% to 3.25%.
“This is really moving into restrictive monetary policy territory. We will be moving into no man’s land,” Swonk said. “We actually haven’t tightened policy to fight inflation since the early 1980s. Their goal is for a prolonged slowdown that grinds inflation slowly down and only gradually increases the unemployment rate. Whether they get there is another issue.”
Goldman Sachs economists, in a report, said they expect the median forecast of Fed officials to show the funds rate at 4% to 4.25% at year-end, with another hike to a peak of 4.25% to 4.5% in 2023.
They then expect a cut in 2024 and two more in 2025.
The Most Probable Low In $SPY: 300-310
The SPY 0.00%↑ trendline originating from the March 2009 lows near 68 puts us at the 300 level.
( SPY 0.00%↑ 2009-Current)
We will look for good short entries along the way down.
The USD Strength
The Dollar Index most likely will test its 2002 highs of 120.00. This should correspond with an .85 Euro. ( EUR/USD )
US Dollar Index 2002- Current
EUR/USD 2002- Current
Crypto Weakness
Bitcoin most likely will fall to 12,000 and should find significant support there.