Predictive Analysis Reveals Future Events a Month and Year Following Federal Reserve Interest Rate Reduction
In the current economic landscape, several analysts and market experts are predicting a bullish outlook for risk-on assets such as the S&P 500 index, Bitcoin, and gold. One such voice is the Kobeissi Letter, which suggests a long-term growth potential for these assets.
The Kobeissi Letter's recent tweet thread and analysis indicate a positive outlook for the S&P 500 index, with the possibility of immediate-term volatility but a promising long-term future. This optimism is based on the current interest rate cuts amid rising inflation and the AI Revolution.
The U.S. Federal Reserve is expected to announce a quarter-point rate cut, with odds at 94.2% according to the CME's FedWatch tool. This decision, to be made on September 17, is significant due to the economic conditions of rising core inflation (above 3.10%) and a weakening labor market.
Peter Chung, head of research at Presto Research, agrees with the impending rate cut, but believes that what Fed Chair Jerome Powell says at the briefing will matter more for how the market reacts. Chung and Han, director of Liquid Fund at HashKey Capital, expect at least three quarter-point rate cuts before the end of the year.
The Kobeissi Letter also notes that if the Fed cuts rates within 2% of the S&P 500's all-time highs, the index has historically ended up higher a year later, as per their analysis. The S&P 500 index, Bitcoin, and gold are currently at or near all-time highs, further supporting this bullish outlook.
Bitcoin, in particular, is currently trading at just under $115,000, according to CoinGecko data. HashKey Capital estimates Bitcoin will hit $700,000 by the end of 2035, based on a 10% CAGR in the gold price. Caladan's three-month estimates for Bitcoin suggest a bullish outcome 62% of the time, with an average gain of 16.50%.
However, Derek Lim, head of research at crypto market-making and trading firm Caladan, warns about the resurgence in speculative activity leading to 'stretched valuations across multiple asset classes.' Xu Han, director of Liquid Fund at HashKey Capital, suggests that a rate cut without a meaningful downward revision of the median dot plot could trigger an altcoin pullback due to elevated open interest.
In conclusion, while the economic conditions are challenging the U.S. Federal Reserve's dual mandate of price stability and maximum employment, several analysts remain optimistic about the long-term prospects of risk-on assets such as the S&P 500 index, Bitcoin, and gold. The upcoming interest rate decision on September 17 will provide more insights into the direction these assets might take.
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