And this move may result in the tapering processes beginning in half the time than expected on top of the decrease to $15 billion a month announced in November. Another reason for such a decision may be provided by the 39-year record inflation that is expected to have reached 6.7% in the month of November.

The labor market in the United States seems to be in great shape as the unemployment rate dropped to 4.2% from 4.6% in the previous month. Such a level of the unemployment is considered as the lowest in order for full employment to be achieved. But in times of a pandemic such an unemployment level could be considered as a much better level as it indicates that the economy is at the full employment capacity. In this context the 210,000 new jobs created in November should be considered as an excellent result.

Regarding inflation, the U.S. economy is definitely overshooting all possible expectations and targets. The Fed has tampered with market expectations, portraying a different reality with transitory high inflation. But it turns out that this is not the case, and now observers of financial market news are expecting new inflation records that the Fed cannot ignore anymore, leaving aside all its past rhetoric of the “transitory nature” of everything.

An inflation level close to or above 6.7% seems to be enough to convince monetary policymakers to take solid actions that now need to be taken. This record rise in prices, which has not been seen since 1982, leave the Fed no other choice but to increase the speed of tapering by 100%, but also to change its rhetoric towards anti-inflationary.

Will this be enough for a sharp drop in the U.S. stock market, or could it just cause another correction? Things will be clear by the end of next week. But the market will certainly stumble over the Fed’s decision. However, investors are well prepared for such a move by the Fed and the correction is likely to not last very long and even the dips could be bought out swiftly. And this may mean a high volatility before the tapering expires in March. And the Fed could come to a more serious decision about rising interest rates and this could indeed cause a stock market plunge. Will it be at the new all-time highs of the S&P 500 index? This is just a question of tactics.

The tactics for this week are charting a likely rebound of the stock market at the beginning, and a decline for S&P 500 in the second half of the week. The major support level for the index is at 4570-4580 points. If the index is sustained above this level it will have a chance to climb to 4610-4615 points. But if it fails to go above the 4570-4580 landmark it may test the lows at 4480-4500 points. The crucial point is that the index must not close below this level on Tuesday. If this is not achieved, it may completely lose its steam and drop to 4100-4200 points. In the other case a good buy opportunity will be created close to 4480-4500 points.

Queen Denise Keza, analyst at Esperio broker