Early morning, the Federal Reserve issued four warnings that shook the market! The stock market changed instantly, retail investors beware of being trapped!
In the early morning, the Federal Reserve truly made a big noise, issuing four warnings in quick succession, this operation is too rare!
The Federal Reserve announced that interest rates would remain unchanged, but as soon as this warning came out, the U.S. stock market immediately wilted. The S&P 500 index was once breaking through the 6000-point mark, but by the end of the day, it fell directly below that.
First, let's talk about the first warning, the inflation warning. Federal Reserve Chairman Powell unexpectedly stated that tariffs would drive up prices, and this impact might continue. In the past, he avoided discussing tariffs, but this time he rarely expressed his stance. To put it simply, the cost of tariffs ultimately falls on the public; when prices rise, our lives become more difficult.
Next, let's look at the second warning, the Federal Reserve has reduced the number of interest rate cuts for next year. 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 the Federal Reserve will not cut rates this year has increased from 4 to 7, showing serious internal disagreement within the Federal Reserve; either two cuts or simply no cuts. The Federal Reserve's policy is truly unpredictable, how can investors not be anxious?
The third warning is even scarier, the economy may experience mild stagflation. Economic forecasts indicate that GDP growth will slow down this year, the unemployment rate will rise, and inflation will be even higher. This monetary policy will be difficult to handle, caught in a dilemma.
The final warning, Powell himself admitted, "I have never seen such a combination of tariffs + geopolitical issues + inflation," making predictions extremely difficult. Once the market heard this, it knew that the Federal Reserve would not act lightly. But what the market fears most is this uncertainty; investors feel insecure, which makes them more cautious in their investments.
The market trends after the Federal Reserve meeting usually manifest the next day because the market needs time to digest this information. Don’t be fooled by yesterday's market close, which seemed uneventful; in fact, a trend has been brewing in the background. These four warnings from the Federal Reserve are like four time bombs, and it’s unknown when they will explode the market. Retail investors should be cautious to avoid being caught off guard when the explosion happens.