Market update following yesterday's Fed meeting

In this report:

• Breaking Down Yesterday's FOMC.
• Tech Earnings Yesterday.
• Cryptonary's Take.

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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Breaking down yesterday's FOMC

There's a lot to cover here, so we'll break it down into some key bullet points:

• The Fed aren't in a hurry to cut rates, and they're not currently on any 'preset course'. Once again, they're going to be extremely data and now policy-dependent.
• The statement was hawkish, but Powell came out with a more dovish tone and almost walked back the hawkishness that came from the statement.
• Powell doesn't seem to be concerned by the labour market or the economy, as both seem to be holding up well.
• The Fed removed the line in the statement about 'progress having been made' and that it 'remained elevated'.
• Powell said that many of the members still believed the interest rate was meaningfully restrictive. So this was a dovish remark as it led the market to believe that 1-2 cuts are possible in 2025.
• Powell acknowledged that some of Trump's policies may be inflationary, but it's hard for them to commit to going forward as they don't know what these policies and their effects will be until they're implemented.
• Powell seemed cautious about committing to going forward, and uncertainty isn't good for markets, really.
• Powell was asked about the rise in bond yields despite the fact that the FED had been cut by 100bps. He put this down to term premia. Powell is half-brushing this aside and suggesting it's the Treasuries' problem rather than an FED problem.
• Surprisingly, Powell believed reserves remained 'abundant', and therefore he didn't see an end to QT anytime soon.

Ultimately, Powell has done what he needed to do yesterday, which is to deliver a bit of a nothing burger. This is keeping his cards close to his chest and not causing too much chaos in the market.

However, the issue with a lot of the above points is that Powell and the FED seem very non-committal here. And this uncertainty is usually not great for markets/risk assets.

The March meeting will be more tricky for Powell and the FED as they will also issue a new Dot Plot and Summary of Economic Projections. The FED likely chose to be non-committal yesterday as this gives them more time to go into March's meeting to see more data and potentially get more clarity around Trump's policies.

Again, the issue with this is that the current level of uncertainty is high, which isn't great for risk assets. If you then pair this with a liquidity situation, which isn't great going forward, it doesn't provide the most ideal setup for risk assets. It's not majorly bearish, but it's also not majorly bullish.

Tech earnings

Yesterday, after the closing bell, we had Earnings from Meta, Microsoft and Tesla, and the results were mixed. Meta beat expectations substantially, and hence, the stock price benefitted. However, Tesla and Microsoft missed Revenues and Earnings.

Despite this, Tesla's share price jumped by 4% after hours of trading, which was a strange development. Microsoft sold lower.

We'll now look to Apple and other Big Tech firms. Ultimately, we're looking for guidance to be positive, and that can continue to aid the equity market.

Cryptonary's take

The forward outlook for markets is a lot of uncertainty. We have a FED that is not committing to a preset path for rates, and we also don't know the extremity of Trump's policies. Alongside this, overall liquidity isn't hugely positive right now, and nor is the outlook going forward in the short term.

However, this can change, especially if a deal is made between Trump and Xi, potentially resulting in the DXY (Dollar Index) down and China stimulating. This is one of the key things we're looking out for.

But unfortunately, it does mean that in the medium term, we might just be in a period of chop, potentially similar to last year, where we want sideways for a period of time post-ETF. It's possible we'll see something similar after the Trump election and inauguration.

Even though the market might just chop for a while, we're still really positive. Bitcoin has held up phenomenally well, and we're just seeing this consistent underlying bid from the institutional sector. We expect BTC to be choppy in the short and maybe medium term.

But going into the second half of the year, we expect a much more substantial upside. We think 2025 might look like 2017 without the blow-off top. So, essentially, from a zoomed-out viewpoint, it's just a continued grind higher. We still expect to see BTC be well above $150k by year-end.

In the meantime, a choppy BTC isn't necessarily bad for Alts/Memes. We saw last year, even when BTC was choppy, we had these hot sectors, and some Alts/memes went on mega runs during that period.

We think something similar to that can happen again over the coming months (first half of 2025). For these reasons, we remain positive but not 'full-full' risk-on yet. If we see a change in liquidity, which might come from a Trump/China deal, that's what we see as the catalyst for us to get more major risk-on. In the meantime, we remain very positive but also opportunistic.

PS - This is not the time to log off. This is the time to remain patient, but when the opportunities come, don't be afraid to pull the trigger and go for it.