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Will the Fed's change in rhetoric provide long-term momentum?

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This week marks the first FOMC meeting of the year, and investors and traders will be watching for clues as to when a change in monetary policy might occur.


It is worth noting that, for now, hopes for a change in March have fallen below 50% due to solid GDP data and as instability in the Red Sea has pushed up transport prices.

The good news is that signs of solid growth and lower inflation in the fourth quarter have increased confidence in a soft landing for the US economy.

However, the future of the S&P 500 remains uncertain even if the Fed softens its rhetoric.

As the Chairman and CEO of JPMorgan Chase USA rightly said, the country is rapidly approaching a cliff as its out-of-control debt continues to grow.

While GDP in current dollar terms grew by 5.8% year-on-year in the fourth quarter, despite interest rates of 5% or more, public debt in current dollar terms rose by 8.2%.

In 2023, debt grew by 8.2% to 2.58 trillion dollars. In the last four years, debt has increased by 46.5%, while the economy has grown by only 27.6%.

Worst of all, the national debt is expected to soar to 181% by the end of 2053, a debt burden far exceeding any previous level.

In short, the debt is on an unsustainable path, and its size may limit the government’s ability or willingness to continue to combat the adverse economic effects of future recessions.

There is also concern that the emergency lending facility set up by the Federal Reserve to stem last spring’s banking crisis will expire after March.

We cannot rule out a new wave of volatility related to the uncertain outlook for regional banks. Finally, the political crisis in the country adds fuel to the fire.

Specifically, it is the conflict between the Texas authorities and the Biden administration over measures to protect the border with Mexico from the influx of illegal immigrants.

Joe Biden’s administration has already stalled the approval of new licences to export LNG, which could affect the state’s economy and the world economy.

Overall, it is too early to paint a carefree future, as many pivots could lead to disaster. It may be best to calibrate the risk-on-risk-off strategy and not forget about precious metals and keep monitoring a gold chart.


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