Fed keeps the Santa Rally alive

The Fed keeps the Santa rally alive despite being more hawkish than expected. It was more hawkish, but only by a touch. Bottom lines are as follows:

  • The Fed has double tapered speed – due to end in March now. However, this was as expected.
  • 3 hikes are now projected for 2022 and this is up from 2. So one extra hike projection is the main hawkish element.
  • There can be a pause between taper and hikes possible. This tweak the hawkish point above allowing some flexibility for the Fed to slow down if needed
  • The long term terminal rate unchanged 2.5%. This is important as it shows the Fed are not seeing a wholesale change due to rising inflation.
  • Yes, inflation projections were revised higher, but crucially this is still seen as transitory/temporary. So, expectations from the Fed are still that inflationary pressures are supply chain driven and will fade over the medium term.

So, in balance not as hawkish as feared and the Fed can move more slowly if they need to. Equities not afraid out of the meeting reassured that the US can always slow rate hikes if Omicron dictates.

Fed keeps Santa rally alive

This Fed decision has also opened up some decent upside potential in gold and platinum with both putting in some very strong signals from the daily chart. Platinums seasonals are very impressive and run up until February, so platinum could be about to soar into 2022.

The seasonals are also very strong for gold as there is usually a lot of physical demand for gold around this time of year. You can learn how to identify key seasonal trends here with me month by month. Ideally, the very best seasonal trades, will combine technicals, seasonals and fundamentals all together.
Fed keeps gold buyers hopes alive too