Hello traders,
Hope you had a great week and some time away from screens this weekend.
We had an excellent week last week and we captured most of the FOMC downside and then subscribers also managed to capture the upside.
THE HIKE THAT SURPRISED NO ONE EXCEPT ONE GUY
Main story this past week was the Fed hiked rates by 25bps for the first time in three years and winked at another one to come by end of this year.
The decision was a unanimous one and hence there was likely no “family fight” this time over the rate decision.
This brings the overnight funds rate to 375bps-400bps.
During the presser, Chairman Kevin Warsh said inflation has been “too high ... for too long.”
“We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed,” he said. “Today, the FOMC decided that this standard has not been satisfied.”
Well this must have caused the market to tank, right?
Nasdaq closed about 1% higher week over week and the S&P largely closed unch on the week. The most rate sensitive index RTY closed about 70bps lower to end the week.
NOT OUT OF THE WOODS YET
The complacent tone in the markets right now is that the rate hikes are priced in and the Hormuz crisis is going to end soon.
The contraian tone is that Crude is popping above 100, the 10 year yield is doing its thing as Scott Bessent invited Jake Paul to the Treasury where he did a checks notes a money spread outside the treasury building.
It feels like somewhere along the way I entered a portal and entered this bizarro world; but I digress. The contrarians are thinking we have a large drawdown on the S&P and the AI/Semi Complex by the end of the year and they are also betting that Republicans losing the midterms may cause and even faster acceleration in the downfall.
SO WHO WOULD BE RIGHT AND WHO WOULD TURN OUT TO BE WRONG IN THE PREDICTION?
