#WarshEndsForwardGuidance

The End of Forward Guidance May Impact Market Reactions

Ending forward guidance is a macroeconomic issue, but it has received less media attention than other topics, such as Bitcoin and Altcoins. However, many of the same discussions apply; central banks become less predictable in terms of future monetary policy, therefore, market participants must rely more heavily on incoming economic data instead of well-scripted expectations.

For traders, this typically results in greater volatility than if forecasts were established. Now, every inflation report and/or employment report and/or policy statement will carry more weight because of the level of unpredictability and fewer "cues" by which to determine what will come next. A good example of this could be the volatility demonstrated by a change in inventory levels and subsequently how quickly sentiment might change as well.

From a cryptocurrency perspective, increased uncertainty would create both opportunities and risks. Investors would potentially see more extreme price fluctuations as liquidity and interest rate outlooks are assessed frequently. Traders looking for short-term gains might enjoy the increased volatility, while long-term investors would likely view it as yet another reason to continue to focus on longer-term trends.

Personally, I believe that most of the time reacting immediately to every macroeconomic headline is not advisable. Instead, I prefer to observe how the markets will process new information over a period of time. If risk assets continue to perform reasonably well after experiencing a reduction in forward guidance from monetary policymakers, this might be a great opportunity for me.