What will be the Fed’s next move?

US stock dropped yesterday

Thursday has been a negative day for Wall Street.

The S&P 500 closed at -1.16%, the Nasdaq ended the market session at -1.47% and the Dow Jones closed at -1.02%.

The decline has been driven by the latest labour data which are stronger than expected.

ADP Nonfarm Employment Change and Initial Jobless Claims for December

Yesterday, December’s payroll reports have shown more hiring than expected and fewer initial jobless claim than anticipated.

During the last month of 2022, US companies added more jobs than predicted, especially due to small- and medium-sized enterprises.

The initial jobless claim for the month of December is 204,000 versus the 225,000 forecasted.

The above data have shown that the labour market is still strong and the Federal Reserve cannot stop its tightening monetary policy yet.

Today’s unmissable data

The economic calendar today is very important as the market will be impacted by the following reports:

  • Nonfarm Payrolls that measure the change in the number of people employed during the previous month, excluding the farming industry
  • U.S. Unemployment Rate which is the percentage of the total workforce that is unemployed and actively seeking employment during the previous month.

Investors have all eyes on both data that are going to be released today at 1:30 pm GMT.

What will be the Fed’s next move?

The Fed’s primary goal at the moment is to reduce the high inflation and bring it back to the 2% target.

A series of interest rate hikes is the key used by the Fed to fight inflation.

The jobs report for the month of December will give us a clue regarding the next Federal Reserve next action.

If the labour market remains strong and wages are increasing, inflation will not slow down which is exactly what the Fed doesn’t want to see.

Most probably, the US central bank will not slow down the interest rate hikes and therefore there will be an increased risk of recession in the near future.

Sentiment Indicator – Fear & Greed Index

The market sentiment is at 44 still in the “Fear” mode which is higher than yesterday.



FedWatch Tool – FED rates probabilities

60.1% of investors are expecting the FED to increase the interest rates by 0.25% at the next meeting.

The remaining 39.9% are expecting a 0.50% rate increase.

The number of investors expecting a rate increase of 0.50% is getting higher compared to yesterday.

No other options are considered at this time.

The next FED meeting is on 1 February 2023.

Portfolio Update

I am monitoring the short positions on stocks and ETFs and act accordingly after today’s job report.

This will allow my portfolio to make a profit if the market drops.

My view remains bearish at the moment, based on the current economic situation and the current FED monetary policy.

I am expecting more downside in the upcoming days, however, I am aiming to make a profit regardless of the market direction.

If you are already copying my portfolio, please keep the copy open.

If you are thinking of copying me, now could be the right time, if you can invest for the long term (years).

Remember to copy the open trades to optimize the copy.

Remember to set the stop loss on the copy at the minimum level, so you don’t get stopped if there is a correction.

Thank you, everyone. Have a nice day!

Steps to follow to copy my portfolio automatically:

1. Create an eToro account here: https://federicamontella.com/go/etoro/

2. Verify your account and make a deposit of at least 200 USD (you can deposit in any currency, like GBP and EUR)

3. Go to my profile page: https://federicamontella.com/go/etoro-passionforprofit/

4. Start the copy (copy open trades and set the lowest stop loss possible, to allow some movement)

5. Enjoy, it’s all automatic. You will make passive income 24/7

Let me know if you have any questions.

 

Federica Montella

eToro Popular Investor

 

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Author: Federica Montella
eToro Popular Investor, food lover and blogger. Stock trader and Popular Investor at eToro. I am on a mission to find the best restaurants and food to eat.