Author: Deep Tide TechFlow

U.S. Stocks: "Flash Crash Moment" After Powell's Press Conference

On Wednesday, the Federal Reserve kept interest rates unchanged in the 3.5%-3.75% range as expected, and the dot plot maintained expectations for one rate cut in 2026 and another in 2027—everything was as anticipated, and the market remained calm.

But a statement by Powell at the press conference triggered a sell-off.

"The forecast is that we will make progress on inflation, but the progress is not as significant as we hoped," Powell stated at the press conference.

Main stock indexes then fell to their daily lows. The Dow Jones Industrial Average fell by more than 600 points at one point, down 1.3%, while the S&P 500 and Nasdaq Composite both dropped by 0.9%.

This is the answer the market was waiting for on March 18: it's not "Will the Fed maintain interest rates?" (that was already determined), but "How does Powell define 'next'?" The answer is: Inflation is more stubborn than expected, and rate cuts are further away than expected.

The "hawkish details" of the dot plot: Seven committee members expect zero rate cuts in 2026.

Of the 19 FOMC participants, 7 indicated they expect rates to remain unchanged this year, one more than in the last update in December. The biggest change is the increase in inflation expectations for 2026, with core PCE and overall PCE both expected to be at 2.7%, still above the Fed's 2% target.

Although forecasts for the next few years show considerable dispersal, the median outlook is for another rate cut in 2027, followed by a long-term stabilization of the federal funds rate around 3.1%.

Powell refused to use the term "stagflation," but admitted that the "dual mandate is under strain."

Powell pushed back against the notion that the U.S. economy is experiencing "stagflation"—a dismal combination of rising prices, slow economic growth, and high unemployment. While he acknowledged that the Fed's dual mandate of stabilizing prices and the labor market is under strain, he stated, "That is not the situation we are in."

"When we use the term stagflation, I always want to point out, that is a term from the 1970s when unemployment was double digits, inflation was very high, and the misery index was through the roof. That is not the case now. Our actual unemployment rate is very close to normal long-term levels, and inflation is just one percentage point above (the Fed's target)… I would reserve the term stagflation for more serious situations."

But the market didn't buy it. Powell mentioned that the oil price shock could weigh down the U.S. economy. "The net effect of the oil price shock is still some downward pressure on spending and employment, as well as upward pressure on inflation."

This is the definition of "stagflation," regardless of Powell's refusal to use the term.

Powell touched on political topics during the press conference, stating, "I have no intention of leaving the board before the investigation into a 'complete and thorough conclusion,'" and if Kevin Warsh's nomination is delayed, he will serve as interim chairman. He added that once the issues are resolved, he has not decided whether to continue serving as a Fed governor.

Powell's term as a governor does not end until early 2028. This means: even if Trump appoints Warsh as chairman, Powell can still vote on the FOMC and continue to influence monetary policy.

Oil Prices: War Enters Day 19, "Half Closure" of the Straits of Hormuz Becomes New Normal

As of March 12, Iran has confirmed 21 attacks on merchant ships. Warnings followed by attacks on vessels led to a sharp decline in maritime transport, with tanker traffic first dropping by about 70%, leaving over 150 ships anchoring outside the strait to avoid risks.

On March 8, crude oil prices surpassed $100 per barrel for the first time since Russia's invasion of Ukraine in 2022. On March 11, the International Energy Agency's 32 member countries unanimously agreed to release 400 million barrels of oil from emergency reserves, equivalent to about four days' worth of global consumption.

The IEA stated that the war in the Middle East is causing the largest supply disruption in the history of the global oil market. Due to the flow of crude oil and petroleum products through the Straits of Hormuz plummeting from about 20 million barrels per day before the war to a trickle, the capacity to bypass this critical waterway is limited, and storage facilities are filling up. Gulf countries have cut total oil production by at least 10 million barrels per day.

"Selective Opening": Iran Allows Some Ally Ships to Pass.

On March 5, the Iranian Revolutionary Guard announced that Iran would only close the Straits of Hormuz to ships from the U.S., Israel, and their Western allies. This was reaffirmed on March 8. On March 13, Turkey's Minister of Transport Abdulkadir Uraloğlu stated that Iran approved a Turkish vessel to pass through the strait. Reports also indicated that two gas carriers flying the Indian flag and a Saudi tanker loaded with 1 million barrels of oil heading to India were permitted to pass.

However, this "selective opening" does not genuinely alleviate the global supply disruption. According to the UK Maritime Trade Operations (UKMTO), since the war began, no more than 5 ships have passed through the strait daily, while the historical average is 138 ships per day.

Trump's "Escort Coalition" Plan Encounters Cold Response.

U.S. President Trump has called on other countries to help Washington reopen the Straits of Hormuz, which typically transports about one-fifth of the world's oil supply. The response to Trump's proposal has been lukewarm so far, with the countries he specifically called out—including China, Japan, France, and the UK—not publicly committing to send navies to protect the strait.

In an interview with the Financial Times on Sunday, Trump stated that if his proposal "is met with no response or a negative response," NATO will face a "very bad" future. Both Japan and Australia stated on Monday that they have no plans to send warships.

Oil Price Outlook: Short Term $109, Potential Drop to $70 by Year-End.

If disruptions in the Straits of Hormuz continue, Brent crude could reach $100 per barrel, but it should drop back to about $70 per barrel by the end of 2026 as the market eventually adjusts. In a worst-case scenario where the Iranian regime attacks regional energy infrastructure and disrupts strait shipping, Brent crude could rise above $130 per barrel.

Despite current surging prices, the U.S. Energy Information Administration (EIA) still expects prices to drop later this year if supply flows return to normal. The EIA now projects the average price of Brent crude for 2026 to be $79 per barrel—significantly up from its previous forecast of $58 per barrel released a month ago.

Cryptocurrency: "Sell the News" Arrives as Expected, Historical 8th Repetition

After the Federal Reserve's decision on Wednesday, the cryptocurrency market reacted with a "sell the news" response as expected.

Bitcoin maintained strong momentum entering the March FOMC meeting, trading above $74,000 after rising for eight consecutive days. However, data compiled by Bitcoin lending company Two Prime suggests that this strength may mask a recurring pattern—FOMC meetings have historically served as short-term bearish catalysts for BTC.

Looking back to 2025, Bitcoin recorded negative returns 7 times (out of 8 meetings) within 48 hours after FOMC meetings. Even in May, when Bitcoin surged, the broader trend pointed to persistent post-meeting weakness, regardless of whether the Fed maintained rates or changed policy direction.

With Bitcoin in an optimistic state before the meeting, the risk shifted towards the classic "sell the news" reaction.

Powell's Statements on Oil Prices: Injecting More Uncertainty into the Crypto Market.

Fed Chairman Powell stated that continuously rising energy prices are affecting the inflation outlook, but "no one knows" how long the impact will last.

Fed Chairman Powell indicated that the rising oil prices "definitely show up" in policymakers' higher inflation outlook this year, raising their forecast to 2.7%, up from 2.4%. He pushed back against comparisons to the 1970s-style stagflation, believing the unemployment rate is close to long-term standards and that inflation is only slightly above the target.

But these comments did not calm the crypto market. The crisis in the Straits of Hormuz caused oil prices to rise above $119 per barrel in early March 2026. Rising oil prices increased inflation expectations, thereby reducing the likelihood of rate cuts and consequently decreasing liquidity for risk assets.

Key Indicators Now On the Market's Radar: ETF Fund Flows.

In order of importance: (1) Net flow data for Bitcoin ETFs from Farside Investors on March 19 and 20; (2) Direction of Bitcoin's market share—is it rising to 60% or falling to 55%; (3) Will Ethereum hold the psychological threshold of $2000; (4) Is the ETF fund flow for XRP reversing or continuing to flow out; (5) Price response of Solana relative to Bitcoin as a signal of altcoin sentiment strength.

ETF fund flow data is a decisive reading. Continuous net inflows on March 19 and 20 suggest that institutions interpret the meeting as positive or at least neutral.

Three Paths for Bitcoin: The "Neutral Maintenance" Scenario Now Seems Most Likely.

If the Fed signals that there may not be interest rate cuts in 2026, this could weigh on risk assets. In this scenario, Bitcoin could drop to $65,000, with altcoins struggling even more.

If the Fed keeps open the possibility of a cut later this year, Bitcoin prices are expected to trade between $68,000 and $74,000.

Lastly, if policymakers signal a potential for two rate cuts, the crypto market might view it as a positive signal. This outcome could push Bitcoin above $75,000, with larger gains in the altcoin market.

It now seems that the Fed has chosen the second path—maintaining one rate cut expectation, but with a hotter inflation outlook, meaning rate cuts may be delayed. This implies Bitcoin could face a 3-5% "sell the news" pullback in the next 48 hours, then fluctuate in the $68,000-$74,000 range.

Today's Summary: Powell Said What the Market Least Wanted to Hear

On March 18, the market held its breath for Powell's press conference. When the answer was revealed, everyone was disappointed.

Fed Chairman Powell emphasized the uncertainty brought by oil price shocks and noted that the U.S. has made less progress on inflation than expected. The stock market then fell.

The 2026 PCE inflation is expected to be 2.7%, above target, and the Fed stated it is unwilling to cut rates until inflation shows clearer improvement. Most FOMC members do not see a rate hike as the baseline scenario, but there will be no rate cuts if inflation does not make further progress.

This is the answer the market received on March 18:

Inflation is more stubborn than expected—2026 overall PCE and core PCE both expected to be 2.7%, far above the Fed's 2% target.

Rate cuts are further away than expected—the dot plot maintains one rate cut in 2026, but 7 committee members expect no rate cuts at all this year.

The impact of oil price shocks "no one knows"—Powell admitted that the war's economic impact is "premature," but he has already raised inflation expectations from 2.4% to 2.7%.

Powell refused to step down—even if Warsh is nominated as chairman, Powell will remain a governor until 2028, continuing to vote within the FOMC.

The market's reaction to these answers was unanimous: U.S. stocks plunged, oil prices soared, and cryptocurrencies experienced a "sell the news" response.

This is not the end of March 18, but the beginning of a longer period of uncertainty. Will oil prices retreat? Can inflation cool down? Will the Fed cut rates in September? Or will it wait until 2027?

No one knows. Even Powell himself said, "If we have a meeting that should skip the SEP (Summary of Economic Projections), this meeting is the best choice because we really don’t know."

But they still released projections. The market still reacted. This is March 18, 2026—a moment defined by uncertainty amidst certainty.