Crypto Market Myth DEBUNKED: Here’s Why The Fed’s Rate Hikes Won’t Lead To A Collapse

In his latest analysis, Jason Pizzino, a macrocycle analyst and founder of The Investing Channel on YouTube, highlights the cyclical nature of markets and how they behave during interest rate hikes. 

Pizzino notes that, historically, the market continues to rise regardless of interest rates, especially during a macro bull market using the 18.6-year economic and real estate cycle. 

He also emphasizes that the beginning of interest rate hikes usually leads to an uptick in the market, but once it reaches its peak, the market changes.

Interest Rate Hike and Its Impact

The Federal Reserve’s recent decision to raise interest rates by a quarter of a percent to hit a target rate of 5% has caused concerns among retail and macro analysts about a potential market collapse. 

However, Pizzino points out that interest rate hikes have little impact on the market. He cites examples from previous cycles when interest rates rose, and the market remained flat or dropped. While some believe that a drop in interest rates could cause a collapse in the market, Pizzino argues that this is untrue, given the market’s cyclical nature.

Market Behavior During FOMC Meetings

Pizzino observes that the market typically experiences a strong trend during FOMC meetings, only to reverse the following day. He cites the May 2022 meeting, which saw a strong trend to the upside, followed by a significant reversal. Pizzino warns that if this were to happen again, it could result in significant market volatility. Nonetheless, he notes that the market is still in a transitional period, and investors should keep an eye on significant lows and higher lows to determine market trends.

The Cyclical Nature of the Market

Pizzino’s analysis suggests that the market is following the same cycle it has in previous cycles, and interest rates have little impact on the market’s overall behavior. 

He notes that during the last stages of the massive real estate boom from 2003 to 2006, interest rates were rising, yet property prices were going ballistic. This phenomenon suggests that the market’s behavior during interest rate hikes is not straightforward and requires a more nuanced understanding.

The macro expert also emphasizes that the market’s cyclical nature enables investors to make informed decisions. He cites examples of the market’s behavior during significant lows, such as in March 2020 during the COVID-19 pandemic, when the market experienced a significant pullback. 

These pullbacks are usually occurring on bad news, such as supply chain issues, lockdowns, and new strands of the virus. However, the market has continued to put in higher lows, indicating a market climb-out.