Mid-Week Update

Pre-FOMC

By now, you have likely read all various interpretations of Wednesday’s FOMC meeting. It is amazing how much ink gets spilt over something so trivial. They are not going to cut; they are updating their forecasts with submissions being permitted on the day, which will include late entries after tomorrow’s CPI data print. Isn’t it ridiculous? These monetary geniuses should not be switching any dot or forward interpretation based on a data print, and we will, of course, never know whether they have ever chosen to do so. The mere fact that they can should, however, raise enough eyebrows.

Powell and the core want to be dovish. That’s all you need to know. The nuances of the dots in itself are meaningless as they will swing as historical data has commanded them to. There is no forward-looking signal in those dots.

How will the markets interpret the dots, the message, and the presser? I would think that conditions are pre-set for the market to interpret that the checklist for a rate cut is still in play, so why change any current equilibrium meaningfully? Think of the Fed as a massive tanker. Once they have changed direction (back in December), they are changing the speed, but it will take time (read data, consensus and conviction) to change direction again. This meeting is not about either of those elements. Speed has been reduced, and expectations have been pushed back. It is also good to remind everyone that markets have generally been way dovish relative to the Fed, so the recent adjustment is just meeting where actionable monetary impulses are headed next.

Don’t overthink it. I am set to listen to Jay spill out the latest gospel, which will likely sound dovish. There shouldn’t be any surprises. Markets have been extremely choppy as of late, which I warned about a few weeks back. Most watchers and pundits are overly focused on what they should be doing as if they are playing fantasy-Fed. This isn’t the real world, so I’d rather focus on what they will do, given previous patterns.

I have asked Macro D to give his thoughts on the latest European developments, which has taken many people off guard. I will conclude his segment with the latest updates on the charts and things we should be focussed on.

Let’s lock in!