The Federal Reserve of the US frequently surprises investors with its decisions on interest rates, which often do not align with market expectations. This causes significant market fluctuations and leaves investors at a loss.

Federal Reserve Rate Fluctuations

The Federal Reserve has consistently been cautious about lowering rates despite market expectations. When it finally decided to go dovish, bond yields shot up, reducing the expected number of future rate cuts.

Why Data Is Misleading

The issue is that the Fed's decisions are based on short-term economic data, which often proves unpredictable. For example, in September, the Fed cut rates due to weak job numbers, which unexpectedly improved the following month.

Investors' Reactions

Investors and traders attempt to predict the Fed's actions, but constant rate adjustments make this extremely challenging. Expectations of major rate cuts, which were high in the first quarter, did not materialize, and now the market is readjusting these expectations, experiencing a 'Fed whiplash.'

The Fed's rate fluctuation situation highlights the importance of focusing on long-term economic trends rather than short-term data. The regulator's unpredictability forces investors to be cautious and adaptive.