June 13th - Why did the market react the way it did?
Expectations changed. Now, investors believe that the Fed will hike rates by as much as 0.75% next week. The move was violent and fast due to the next FOMC meeting happening exceptionally soon.


Predictions:
(1) Inflation will remain high until sometime around March and June 2023. Fed Funds Rate will go up gradually until then.
(2) Dollar will get very strong, forcing China to make a choice: (a) devalue its currency or (b) continue selling US treasuries. Trade balance will continue to deteriorate as imports will surge. Exporters will suffer. Companies will large amounts of international revenue will suffer.

Appendix
How are the probabilities are calculated? Read this
Dividend Dollars's avatar
What makes you think that the dollar will get strong?
Gabriel Kaplan's avatar
@dividenddollars US interest rates are rising faster than Europe and Japan. Money flows to higher interest currencies. Happened with Volcker --> Check the dollar index in the 1980s --> Led to major sovereign debt defaults early to mid 1980s.
US response was the Plaza Accord.
Joey Hirendernath's avatar
Which is the next country that will be heavily affected by the dollar becoming strong?

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