The Airon: Fed communication further exacerbates market volatility | Anue tycoon-US shares

The stronger-than-expected US nonfarm payrolls report led to another round of high volatility in US stocks on Friday (2), which Allianz chief economic adviser Mohamed El-Erian said made the Federal Reserve (the Fed Chairman Jerome Powell and other officials have learned another lesson that the Fed must be very careful with its messages to reduce volatility.

US job growth in November far exceeded market expectations. US stock indices fluctuated after Friday’s lower open (2). As the Federal Reserve’s “megaphone” reiterated that it expected a 2-yard interest rate hike in December, the bargain hunters settled, and US stocks are over. The market decline is converging,Dow JonesExciting red 34.87 points, S&P,That fingerslightly blackened,tax halfdown more than 1%.

In this regard, Il Erlang believes that the Fed’s communication has once again exacerbated excessive market volatility, because the Fed and the financial market have not listened to each other’s signals.

In a dovish signal Wednesday in a speech at the Brookings Institution, Powell said the slowdown in Fed rate hikes could come as soon as the December meeting, but warned that despite rising inflation, some promising developments, but the road to higher rates is still a long way off to restore price stability.

“While Chairman Powell tried to maintain a hawkish and dovish balance in his Wednesday speech, he in no way countered the notable rebound the market has seen, although he did say a few things, including inflation warnings, but He doesn’t realize where the technicians are in this market, he doesn’t realize what’s wrong with the behavior, which is why the stock market is overreacting.

Allan believes Powell’s clear-cut statement Wednesday that the time to slow the pace of rate hikes could be at the December meeting is dynamite. Markets turned a deaf ear to Powell’s warnings about terminal interest rates that the Fed has more to do in the fight against inflation and to warnings that it won’t ease policy too soon.

Markets are focusing on what they want to hear, not the Fed’s warnings, which is bad for the health of US and global economies, Il-Airan said.

The Erlang expects the Fed to direct public attention to raising interest rates above 5%, but this will be quite tricky and the Fed will need to be very careful with its messaging to reduce volatility as the Fed is holding back the worst rate hikes in the 40s. Torn between hyperinflation and keeping the economy from slipping quickly into recession.