Join institutional investors, analysts and strategists from the world's largest banks: Subscribe today
Already have an account? log in
‘No Meaningful Conviction’
Market observers employed hopelessly outdated colloquialisms to describe subdued sentiment at the beginning of the first full trading week of December.
Canaccord's Tony Dwyer, for example, told Bloomberg Television that after November's raucous rally, equities may need to "chillax." Really takes you back -- to Wayne Campbell's basement.
What needs to "chillax" (indeed, what almost has to chillax) is rate cut pricing for 2024, which frankly can't get any more dovish without evidence to suggest
This is why we need weekly dot plots!
Party on Garth.
derek. You are an expert but wouldn’t weekly dots be too noisy? I’d rather they did quarterly dots.
An expert? More like a chattering dilatant.
“But the bond market’s view is what matters.” Right on. When I published my first big paper in the mid-70s I was invited to be the keynote speaker for a gathering of fixed-income managers and they were happy to tell me that this quote reflected exactly what they knew to be the case. They want me to spread that word to my academic colleagues, which is what I did in the followup paper.
Damned if you do and damned if you don’t. In my slightly-informed opinion, all this Fed transparency and plain talk has only resulted in a lot more market drivers piled into the back seat, and it’s become so crowded, they have now begun to climb into the front seat.
You’ve outlined nicely here, and several times recently, why my particular thought exercise “isn’t right” which is to plumb a middle ground of sorts and try to kill two birds with one last surprise, and relatively meaningless (at this point) hike — 25 bp now to keep FCI snug and on SEP target, with a tip that should inflation meaningfully slow further and/or the economy seem to being doing anything more than slowing, maybe the first cut won’t be a toe in the water. Powell could rationalize the perceived reversal by reminding traders that bread, like dot plots, also goes stale. But stale bread is still useable, and sometimes even more useful. Ta-da! No change to the dot plot and shame to all the tasseographers.
But still damned if you do and damned if you don’t and I agree this unresolved tension, while completely made up, makes me nervous going into the meeting. Like H says, if they sit tight and don’t change the dot plot, the market drivers will still probably do it for them, likely while Powell is still mopping up his press conference. That seems riskier to me than Powell putting both hands back on the wheel and kicking all the drivers back into the back seat as we turn the corner on an election year.