Economists expect the worst and a sharp reversal in the markets before the Fed meeting

In two days, on February 1, 2023, the Federal Open Market Committee (FOMC) is scheduled to meet. While the market is expecting rate cuts, some analysts believe the Fed will continue to raise the federal funds rate. Chris Vermeulen, founder and chief investment officer of The Technical Traders, insists that the S&P 500 is likely to slide 37% lower than its current position.

One strategist predicts a potential market correction due to Powell’s anticipation of tighter financial conditions.

Markets are closely watching the upcoming Federal Open Market Committee (FOMC) meeting, scheduled for Wednesday, February 1, in three days. Last week, Bitcoin.com News reported how investors are closely watching the decision of Jerome Powell, the 16th chairman of the Federal Reserve. As the FOMC meeting approaches, there has been a lot of discussion about the outcome on social media.

An economist known as “The Carter” explained on January 27 that “there will be blood on February 1,” referring to the turmoil the markets may experience after Powell’s speech to the nation. While some investors are expecting a dovish Fed and possible rate cuts, The Carter argues that Jerome Powell will instead continue to tighten and implement a restrictive policy.

At the November FOMC he referred to the “broader tightening project” as having three stages: 1) rapid hikes to get to neutral, 2) measured hikes to get to “sufficiently restrictive”, and 3) staying at the terminal rate for some time.

The Carter (@TheCarter758) January 27, 2023

The analyst notes that Jerome Powell has previously evoked a “broader tightening project“in three stages: rapid increases to reach a neutral rate, measured increases to reach a rate”sufficiently restrictive” and maintaining the terminal rate for some time. The president of the U.S. Federal Reserve, “Jerome Powell, will tighten financial conditions by tackling rate cuts head on“, The Carter noted in a message on Twitter.

To repeat: Powell is famously well attuned to market conditions. He knows:

1. The market is prepped and ready and front-running rate cuts

2. Cleveland Fed nowcast is turning up

3. Commodities are firming

4. Housing is firming

5. Credit is robust

The Carter (@TheCarter758) January 27, 2023

The economist expects the Fed chairman to address this topic forcefully on Feb. 1 and steer the conversation to how long the Fed should hold the terminal rate and why. “Expect him to expand on the lessons of the 1970s“, said The Carter. “Why the market continues to punch Powell in the face without expecting a counterpunch is beyond me. This’is the craziest market setup, right here, right now. There will be blood on February 1“.

It’s a matter of HOW Powell hammers on February 1, not IF.

Look for him to forcefully shift the conversation toward how long the Fed needs to hold at the terminal rate, and WHY. Look for him to expand on the lessons of the 1970s.

The Carter (@TheCarter758) January 27, 2023

Expert predicts 37% drop in S&P 500 as gold and silver shine in bear market

Interview with David Lin, anchor and producer at Kitco News, Chris Vermeulen founder and chief investment officer of The Technical Traders, said stocks must undergo a correction.

“I honestly think the S&P 500 could fall another potential 37 percent, or so, from current levels“, Chris Vermeulen told Lin. “It’s enough to create a lot of damage, a lot of stress, a lot of bankruptcies, and I’on” he added. On the other hand, Chris Vermeulen expects gold and silver to shine throughout this bear market. “That’s when precious metals and miners take off“, insisted Chris Vermeulen while discussing market cycles.

Chris Vermeulen is not the only investor who thinks gold and silver are ready to take off. In December 2022, AuAg ESG Gold Mining ETF manager Eric Strand said gold will make a new all-time high in 2023 and that central banks like the Federal Reserve will pivot on rate hikes.

“We believe that central banks will pivot on their rate hikes and become dovish during 2023, setting off an explosive move for gold for years to come“, said Eric Strand. “So we think gold will end 2023 up at least 20%, and we also see miners outperforming gold by a factor of two.“

While gold is on the rise and expectations for 2023 are high, Harry Dent, founder of HS Dent Investment Management, has a contrarian view on gold’s performance this year. Dent predicts that the yellow precious metal could lose $900 to $1,000 over the next 18 months.