It’s completely unclear what Trump and his Republican circle are thinking ahead of the elections. Trump was supposed to create an investor's "paradise", markets rallying across the board, rate cuts, and clear skies ahead. Yet because of Iran and the resulting surge in oil prices, that plan is stalling.
To me, it feels odd to think they will hike rates, considering Kevin Warsh (at the Fed) is clearly Trump’s appointee and someone who, judging by indirect signs, intends to flood the economy with liquidity. However, oil prices remain high and bond yields are climbing, leaving them with little other choice 🤔
When the rate-cut cycle reverses direction, markets often face a short-term shock, but they adapt and continue upward over the long run.
That said, one must realize that a 25 bps hike followed by a solid liquidity injection will still have a net positive effect on crypto and the broader markets. Whatever the rate happens to be in that specific moment won't really matter.
Just a reminder: rates were elevated prior to 2025, and that didn't stop both traditional markets and crypto from outperforming to the upside.
The smartest move right now is to wait until Wednesday, evaluate the final Fed numbers and rhetoric, and only build a trading plan once the market shows its hand.