The most important day for stocks and the entire financial sector

The most important day for stocks and the entire financial sector
Photo by Nicholas Cappello / Unsplash

At 21:00 Moscow time today, the U.S. Federal Reserve will announce its interest rate decision.

Now the rate is at 1.75%, analysts and investors forecast an increase of 0.75%. The market is ready for such figures and in case of such decision from the Fed, it will not be perceived as a strong negative.

After many years of soft monetary policy from the world central banks, the character of market behavior after the change of the monetary policy rate has changed a little. The rate hike is still negative for risky assets (stocks and cryptocurrencies), but there is a slight time lag.

The market is ready for today's increase by 0.75%, this figure was announced by the Fed more than once, and therefore everything is under control, the inflation can be fought and there are no new unexpected problems. So, we can buy for now.

Despite the short-term positive, the rate is higher, the money has become more expensive for business, and accordingly the economy will develop more slowly. Which will lead to the selling of assets.

In the case of a 1% increase, the market will panic sell-off. A sharp increase can't be caused by nothing, which means the Fed can't handle it. We need to sell.

However, both the first and second options are essentially similar: the only difference is the speed of selling.