Arthur Hayes insights on what to expect on Fed day and EU markets

Crypto exchange BitMEX co-founder Arthur Hayes tells investors to look forward to the Federal Reserve’s (Fed) comments on Quantitative Tightening (QT) and the European Union’s better economic performance against America ahead of Wednesday’s Fed Day announcement. 

In an X post, Hayes asked if the Fed would signal an end to QT, its policy of withdrawing liquidity from financial markets. He also mentioned Europe’s increased defense spending, financed by the European Central Bank’s stimulus, could outweigh the short-term fiscal strength of the US economy.

“If yes, correction over. If no, hold on to your butts,” Hayes wrote, insinuating that if European fiscal expansion takes precedence over US policies, market corrections could stabilize. Otherwise, volatility will continue.

Hayes comments come after US stocks lose week start gains 

The American businessman’s comments are against the backdrop of a reversal in sentiment on Wall Street, with major indices falling after a brief rebound on Monday. According to Yahoo Finance charts, the S&P 500 shed 1.40% in the last 48 hours, the Nasdaq 100 slid 1.8%, and the Dow Jones declined 0.77%. 

Heavy selling hit the largest US technology companies, including Facebook, which became the last of the Magnificent 7 stocks to give back all its year-to-date gains. Chip giant Nvidia is on a 3.43% downtick on Wednesday’s pre-market trading session.

European stocks, however, did not suffer the same fate as US equities. The euro remained well above the dollar at $1.09 after Germany’s outgoing parliament approved a significant expansion in government borrowing. 

The measure, secured by the CDU/CSU, SPD, and Green parties, includes a €500 billion ($540 billion) infrastructure investment plan and exempts defense spending from debt limits. The bill now awaits approval from Germany’s Bundesrat, the upper house representing the country’s 16 states.

The prospect of increased spending in Europe added gains to arms manufacturer Rheinmetall stock price, which surged over 123% year-to-date. BAE Systems added more than 0.5%, and the Stoxx 600 Aerospace & Defense ETF rose 1.46%. 

Meanwhile, the broader Stoxx 600 had slightly climbed 0.61% before markets closed on Tuesday but has now lost 0.21%, which is still above Wall Street’s numbers. 

Fed will hold rates steady, but future cuts still on the table

The Federal Reserve is widely expected to keep interest rates unchanged after its March 18-19 meeting. Yet, traders anticipate the central bank will signal potential rate cuts later this year. 

Current market pricing suggests three rate reductions, most likely starting in June, while economists forecast two cuts, which are in line with what policymakers may project in their updated economic forecasts on Wednesday.

For investors, concerns have moved beyond interest rates to the slowing economic growth and disruptions caused by the Trump administration’s trade policy. 

Jeff Blazek, co-chief investment officer for multi-asset strategies at Neuberger Berman, told Bloomberg that the market is no longer watching the Fed’s every move. 

“Yes, we should be aware of the possible increase in inflation. But we are far more focused on the growth implications from potential demand destruction as prices go up due to tariffs,” he said.

American trade ally Canada wants to join the EU

Over a week ago, President Trump imposed a blanket 25% tariff on all US steel and aluminum imports. The levies drew immediate retaliation from Canada and the European Union, but Mexico and the UK opted for a more measured response.

According to a recent poll, nearly half of Canadians are okay with the American ally joining the European Commission. The survey, conducted in late February, found that twice as many Canadians held a positive view of Europe (68%) compared to the U.S. (34%). 

The EU believes the poll results may have been influenced by Trump’s approach to trade laws, which have strained relations with Canada.

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