Probably The Next Powerful Person In The Market

The most powerful “person” in the market would be Mr. Market itself, for it embodies the entire realm of the financial markets.

(Picture credit: Kaboompics.com from pexels.com)

Just like the story narratives that commonly feature in fantasy novels and games, there is another level of divine beings (sometimes called demi-gods or quasi-deities, depending on which source material you gathered from) below the all-encompassing one. Similarly, such entities do exist in the financial markets, one tier below Mr. Market.

One of them that has the honour to be the next powerful “person”, would be the Fed, short for the United States (U.S.) Federal Reserve. Their near omnipotence led to many investors to follow the famous mantra of “do not fight the Fed”.

With just a few words from the Fed Chairman Jerome Powell on Wednesday, the U.S. markets dropped around 3% later that afternoon. The main perspective from the speech was a possibility of lesser interest rate cuts (purportedly two, out of the planned four) in 2025. The shockwave extended to the local markets on Thursday morning, with the Straits Times Index (STI) dropping from near 3780 at the close of Wednesday to 3720 on Friday evening. This is given since the U.S.’ and our interest rates are positively correlated with each other.

Ironically just a couple of weeks ago, I had commented that a lot of geniuses appeared during the bull market, like mushrooms sprouting after a spell of wet weather. Now with some market pessimism, perhaps I shall dish out some “genius” views on this whole thing.

The Bedokian’s Take

While the Fed have the final say in setting interest rates, they require data and statistics to make the decisions; in other words, the Fed is reactive. If the inflation situation is not as bad as it seems, they might increase the frequency of rate cut to three or back to four the next year. Frankly, if no one can predict the future of the market and economy, I can say the Fed would be at a slight advantage over us in terms of guesstimating.

That being said, or often said by me, these down situations presented moments where one could cherry pick good counters and securities at bargain prices.

However, as at the time of writing this post (Friday night Singapore time, Friday morning New York time), the U.S. market seems to be picking up steam.

Ah well…(shrug)