What Is FOMC: How Its Impact On Crypto Markets, Stocks, And ETFs - Analysis Last Five Years

Let's explore the important role of the Federal Open Market Committee (FOMC) in shaping market dynamics, especially in the context of crypto , stocks , and ETFs . To provide a deeper understanding, we will analyze historical data from the last five years.

What is the FOMC?

The FOMC, or Federal Open Market Committee, is the monetary policy body responsible for setting interest rates and monetary policy in the United States. Its influence on global markets is significant, and every statement and decision taken by the FOMC can trigger dramatic changes in the prices of various assets.

FOMC Meeting Schedule

The FOMC meeting schedule for the last five years can be seen on the Federal Reserve's official website at FOMC Calendars . These meetings are:

• 2024:
  • January 30-31, 2024
  • March 19-20, 2024
  • May 7-8, 2024
  • June 18-19, 2024
  • August 6-7, 2024
  • September 17-18, 2024
  • October 29-30, 2024
  • December 10-11, 2024

The Effect of the FOMC on Various Asset Prices

In the past five years, the FOMC has had a significant impact on various asset classes. Let's analyze the historical data:

Pass Crypto

The crypto market often responds very quickly to FOMC decisions. Rising interest rates typically reduce investors' interest in risky assets such as cryptocurrencies, which can result in prices falling. Conversely, loose monetary policy tends to support crypto market growth. Over the past five years, monetary policies announced by the FOMC have had a significant impact on the price of Bitcoin:

• Hawkish Policy: When the FOMC adopts a hawkish policy with an increase in interest rates, the price of Bitcoin (BTC IDR ) tends to decline. Investors tend to switch to more stable dollar-denominated assets.
• Dovish Policy: On the other hand, dovish policies from the FOMC, such as maintaining low interest rates, will not reduce the price of Bitcoin (BTC IDR ) and investors will usually buy Bitcoin and other crypto assets.

A concrete example is when the FOMC announced plans to increase interest rates in 2018. The price of Bitcoin, along with the crypto market in general, experienced a significant decline in response to the action. In contrast, when the FOMC announced looser monetary policy during the COVID-19 pandemic in 2020, Bitcoin prices surged to their highest levels.

Also Read: How To Buy Bitcoin For Beginners

Stock market

Data from the past five years shows that stocks often experience volatility during and after FOMC announcements. Dovish statements tend to provide positive sentiment to the stock market, while hawkish statements can trigger a decline in stock prices. Blue-chip stocks, which represent large, stable companies, also respond to FOMC policy:

• Hawkish Policies: Hawkish policies can result in a decline in the prices of blue-chip stocks because rising interest rates can increase a company's borrowing costs and reduce net income.
• Dovish Policy: Conversely, a dovish policy can provide positive sentiment to the blue-chip stock market as low interest rates encourage investors to seek higher-yielding risky assets.

An example that can be mentioned is when the FOMC announced an increase in interest rates in 2018, the blue-chip stock market experienced volatility and decline. However, during the dovish policy period during the COVID-19 pandemic, the blue-chip stock market recovered and reached new highs.

Pasar ETF (Exchange-Traded Fund)

The influence of the FOMC is also felt in various ETFs covering various asset classes. Examples of three relevant ETFs are:

• SPDR S&P 500 ETF Trust (SPY): This ETF reflects the performance of the S&P 500 Index. FOMC policies can significantly affect the performance of SPY.
• iShares Russell 2000 ETF (IWM): This ETF reflects the performance of the Russell 2000 Index, which includes stocks of smaller companies. FOMC policy affects IWM performance because interest rates impact smaller companies that are more vulnerable.
• iShares MSCI Emerging Markets ETF (EEM): This ETF includes stocks from emerging market economies. A dovish FOMC policy could trigger fund flows into emerging market economies, affecting EEM performance.

A concrete example is during the dovish policy period during the COVID-19 pandemic, SPY and EEM experienced increased performance because investors looked for risky assets with the potential for high returns. However, when the FOMC announces hawkish policies, especially regarding interest rates, the performance of SPY and IWM may respond with a decline.

Dovish vs Hawkish In FOMC Meeting

At every FOMC meeting, we hear the terms "dovish" and "hawkish" describing the committee members' attitudes toward monetary policy.

What is Hawkish?

FOMC members are considered "hawkish" when they support tight monetary policy. This includes increasing interest rates or other measures aimed at controlling inflation. Hawkish policies tend to have a negative impact on risk asset markets.

What Is Dovish?

In contrast, FOMC members are considered "dovish" when they support loose monetary policy. This may include keeping interest rates low or even lowering them to stimulate economic growth. Dovish policies tend to support risk asset markets.

Is the Fed Hawkish or Dovish?

Analysis of historical data for the last five years shows that the Federal Reserve (The Fed) has adopted varying attitudes at FOMC meetings. Recent statements and policies indicate a dovish stance, with efforts to maintain loose monetary policy to support economic growth.

Analysis After FOMC

After the FOMC announcement, the market often experiences sharp changes in the prices of key assets. It is important to carry out careful fundamental and technical analysis, as well as wise risk management. Market reactions may vary, but by understanding the FOMC's stance and following the latest developments, investors and traders can be better prepared to deal with market volatility and make informed investment decisions.

As a Market Analyst, I will continue to monitor FOMC developments and provide in-depth analysis to help you make better decisions in your investments.

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DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.