The Federal Reserve Issues Four Warnings at Dawn! The Stock Market Changes Instantly, Retail Investors Beware of Being Trapped!
At dawn, the Federal Reserve really made a big commotion, issuing four warnings in a row, which is quite rare!
The Federal Reserve announced that it would keep interest rates unchanged, but as soon as this warning came out, the US stock market immediately took a dive. The S&P 500 index had even briefly broken the 6000-point mark, but by the close, it had fallen directly below it.
First, let's talk about the first warning, the inflation warning. Federal Reserve Chairman Powell actually stated that tariffs would push up prices, and this impact might persist. Previously, he had avoided discussing tariffs, but this time he unusually expressed his stance. In plain terms, the cost of tariffs ultimately falls on the public; when prices rise, our lives will become even harder.
Next, look at the second warning, the Federal Reserve has reduced the number of rate cuts for next year by one. The official statement is that there will be two rate cuts this year, but only one next year. Moreover, the number of officials who believe that the Federal Reserve will not cut rates at all this year has increased from 4 to 7. There is serious disagreement within the Federal Reserve; it's either two rate cuts or none at all. The Federal Reserve's policy is truly unpredictable, how can investors not feel anxious?
The third warning is even scarier: the economy may face mild stagflation. The economic forecast summary indicates that GDP growth will slow this year, unemployment will rise, and inflation will be higher. This monetary policy becomes difficult to manage, it's a dilemma.
The final warning, Powell himself admitted, "I've never seen such a combination of tariffs + geopolitics + inflation," making predictions extremely difficult. Once the market heard this, it knew the Federal Reserve would not take action lightly. But what the market fears most is this uncertainty; investors feel unsure, making them more cautious in their investments.
The market trends after the Federal Reserve meeting usually become apparent the next day, as the market needs time to digest this information. Don't be fooled by the fact that there seemed to be no major movement in the market at closing yesterday; a trend has already been brewing in the background. These four warnings from the Federal Reserve are like four timed bombs, and no one knows when they will explode in the market. Retail investors should be cautious to avoid being caught off guard.
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