II-Disruptive
The Fed will not cut the key interest rate until 2024 - The Fed will raise interest rates three more times by 0.25 percentage points in 2023 to 5,00 - 5,25 % - Inflation has cooled, but the Fed still needs more evidence - The key interest rate will not be cut until 2024 - The economic outlook for 2023 is weak - unemployment is increasing - In the stock market, there are not many drivers that would increase stock prices. An investor must be selective and patient. The Fed raised the key interest rate by 0.50 percentage points. According to the new forecast, the market will have to endure three more increases of 0.25 percentage points. This calmed the mood in the stock market. The Fed's decision sent stocks down. This was also the case at the November meeting, when the Fed's hawkish speech sent stocks into a tailspin. Now the shares fell immediately after the announcement of the interest rate decision. However, the decline remained fairly moderate. In a press conference, Chairman Jerome Powell said that it is important to continue the fight against inflation. In the December interest rate forecast, Fed leaders raised the key interest rate forecast. This was to be expected, as Powell already hinted at this in the November meeting. According to the new forecast, the key interest rate will rise to the level of 5.00-5.25 percent before it starts to be cut. This would mean a total of 0.75 percentage point increase in the key interest rate. The market now expects two hikes of 0.25 percentage points in the next meetings (February and March), after which the Fed will take a break. Conclusion The market will have to endure high interest rates for at least another year. In addition, the economy must weaken, which is indicated by the increase in unemployment in the Fed's forecast. In the future, the investor should follow the development of the US labor market even more closely. It would have to congeal for the Fed to start considering taking its foot off the brake. High interest rates, slow economic growth, high inflation and rising unemployment are not a good combination for the stock market in 2023. In the light of history, the stock market should be below the current valuation level. Therefore, we think it is slightly more likely stocks to drop than rise in the coming months. In the neutral scenario, stocks will seesaw without direction at least until the first half of 2023. We think the likely range is 3800-4100 points for the S&P 500 index. $SPX500 (SPX500 Index (Non Expiry)) We think that @II-Quality will outperform S&P 500 index in 2023. @II-Disruptive will skyrocket when the Fed hints rate cuts.
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