The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Before FOMC
Headlines were unremarkable and markets didn’t feel obligated to do much of anything over the day. Overnight futures lost value consistently and without drama. The S&P 500 opened down about 50 points and chopped and flopped for 30 minutes before catching a bit of a bid and recovering about half the opening pain. Positive chatter out of the White House concerning tariffs spurred some optimism but the talk was apparently just talk and the market shrugged its shoulders as usual. We treaded water around the -30 point level for the day and markets concerned themselves with what the Fed might say, or do, tomorrow at 2 PM.
The expectations are for no change in the Fed Funds rate. The futures prices assign a 2% chance of a cut. Of 94 estimates published on Bloomberg, all 94 project the Fed to leave rates as-is.
Tomorrow, at least as far as a policy rate is concerned, is essentially unanimously considered to be a nothing burger.
However, every FOMC decision matters to markets and usually generates volatility. We are going to care about what the statement says, what the Chairman says at the press conference, and what his tone suggests. The market currently expects 80 bips of cuts for the year… so will the Fed hint, or will we imagine that’s he’s hinting, that at least 3 cuts are on their way?
That’s the lens through which investors will gauge whether the FOMC event was a dovish or hawkish standing pat.
I think it’s wacky to read so much into the turns of phrase and knee-jerk word choice of the Chairman but that’s what we do. So here we go.
I think the market is *desperate* to get some dovish pillow-talk out of the Chairman. We’ll see if he delivers.
See you tomorrow.
-Mike
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