Financial News vs. Noise
Here is the unedited version of the interview I did with Nancy Tengler at the CBOE
Today is FOMC. No policy change is expected so the focus will be on the Summary of Economic Projections and the press conference. The December SEP called for 3 rate cuts this year, any deviation from that will be market moving. The market will also be looking for guidance on how the tapering of quantitative tightening is going to look. I think that the market’s continued run despite the downward shift in Fed rate cut projections could be partially fueled by the thinking that the Fed is going to cut despite hotter inflation readings out of fear of triggering a recession. Here’s what Nick Timiraos had to say this morning:
The Fed, though, has a different preoccupation: If it waits too long, will it inadvertently cause a recession?
Officials won’t put recession risk front and center this week. Yet that risk is likely to drive its thinking over the remainder of the year, leaving it on track to cut rates at some point.
I’ve been looking at the hotter than expected inflation numbers, along with economic numbers that look fine (though they do keep getting revised down and I’m not sure how much I believe them in the first place) and wondering how the Fed can cut. It seems the Fed is more worried about leaving rates too high for too long and is willing to move the goalposts on inflation.
Yesterday in the markets was interesting, but probably hard to read too much into the day before FOMC. They tried to sell it off but couldn’t. I sold some more into strength and continue to have hedges on. I don’t feel great about that given with Nick said though. I don’t think Powell will surprise the market’s by being overly dovish, but just sticking with the 3 cuts in light of the recent hot inflation data could be enough for the bulls.
Two real interesting names yesterday were GEO and CXW. I trade both of these names and have them both in my longer term basket. Yesterday they popped on this:
Border Enforcement in Disarray as Courts Debate Texas Power to Arrest, Deport Immigrants-WSJ
These will also track the probability of Trump being elected. Both of these stocks were much higher during Trump’s first term and should he get elected you have to figure they stand to benefit.
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