How will the markets respond to the Fed’s actions? By CoinTelegraph

©Reuters. How will the markets respond to the Fed’s actions?

Markets reel in new fears. It was already assumed that the Federal Reserve (the Fed) of the United States would start raising interest rates from the March meeting. However, we are all assuming that they will do it the traditional way. That is, 0.25 points at a time. Recently, it has been suggested that a break from that tradition is possible. In other words, an increase of 0.5 points is possible. Certain. Inflation is too high. Certain. The Fed has taken too long to react. Will they dare to take such a big leap?

Investing, in a way, is the art of guessing. Obviously, to invest you need to have expectations. Where we are? Where are we going? If we think that the best is yet to come, we are optimistic. If we think that things will get worse, we are pessimistic. Optimists buy. Pessimists sell. Here is a great secret of the investment world: The anticipation of the news is more important than the news itself. The rumor is more powerful than the fact. From this very fundamental principle, comes the phrase “Buy the rumour, sell the news”.

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Suppose the market expects a big announcement on a certain date. Investors do not wait for that day to buy. They anticipate the facts. They prefer to act in the moment because they know very well that early investors have the upper hand. These early purchases generate the first increases. And those early rises reaffirm the bullish suspensions of the market. In this way, a small speculative boom is created around the event. All this happens before the fact as such. In the expectation phase, the market gives free rein to the imagination. And investors often fall victim to hype. Emotions create a bias. And the market temporarily loses its link with reality. In other words, madness breaks out.

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