**FOMC Prep Big Three | Market Rundown
Mar 22
The number itself will not create certainty. The text of the speech will be extremely important.
Today:
Market Rundown
FOMC Prep
1- Market Rundown:
Good morning. The dollar is down 13. Bonds are mixed and net firmer in the short end. Stocks are gyrating on either side of unchanged. Gold is up $13. 50 at $1954.70. Silver FU is up 31 cents. Crypto is up 50 to 150 bps. Grains are down unevenly.
Gold: The rally today is indicative of 2 things: 1) Gold is increasingly being viewed as a viable hedge no matter what happens (that’s very good) and 2) shorts are covering ahead of the number (means nothing).
Comment: There is a lot to consider today. To help you save time we suggest doing what we did. Read a Masterlist of predictions. Surf reports for the one you like most and read it for real context. Then pick and read more if you still are not satisfied.
If you are.. then get some popcorn. Days like today can offer tactical entry into macro trades you’ve been waiting for, or give you some scalping opportunities. Otherwise. Don’t drop your long term bias from short term shenanigans.
Consensus: They agree on not knowing.
Money market measures are currently pricing an 80% implied probability of a 25bps rate rise to 4.75-5.00%, and a 20% probability of an unchanged rate decision.
On days like this, the consensus, if you can find it, is useless. Yes, there is a median point, but the dispersion of opinions is so wide around it that the market is almost certainly not looking at it collectively as a median point. Therefore there is no market expectation. Noone knows—but it is their job to have an opinion.
They Agree on This:
One thing everyone agrees on, that whatever the Fed does with rates, he will counter balance with rhetoric. The number matters less out of context today than likely almost ever before since Powell took the job.
Powell will be both good cop and bad cop today. decision will be one cop. Statement will be the other cop. Meeting will titrate according to market movement. The statement matters.
Split Opinions:
Everyone is looking at things differently today. Most are looking at this decision as a compromise. We have some experience with these type events.1
Powell’s Statement:
Most will be looking for a reiteration of the following statement which implicitly states: ‘We stay the course regardless of the bank thing last week’. That statement is:
"…ongoing increase in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time."
If the above statement is removed, it means less inflation vigilance, more crisis worry.. and the market will treat it effectively as easing. If it is altered, how it is altered matters greatly.
The Big Three Calls
They all believe that on balance Powell must convey the following: He must acknowledge the bank crisis, reiterate his inflationary fighting stance, reassert his independence from the Treasury, and most of all, inspire confidence that whatever he says will be rock solid. Prevaricating will not help.
His stance created this uncertainty, and unless he wants it to get even bigger (he might), then he has to back up his decision with an explanation. Today’s number matters more in context than in isolation.
Here are GS, JPM, and MS’s:
Rate opinion
Forward guidance opinion
Rationale/qualifiers
Plus more…