Quick Take on the FOMC
We got the cut everyone was anticipating. 2 dissented in favor of no cut, one dissented in favor of a 50 bp cut. The person who I would argue is most plugged into the admin wanted 50. I’d pay attention.
The “dots” moved a smidge, but not enough to do much to market expectations.
Powell, during the presser, argued that risk is balanced and that we are in “neutralish” policy (my word, not his).
There is an argument making its way through the markets that Reserve Management is a form of QE. Our front-end traders disagree, and point out this is very similar to what was “ordinary course of business” from 2001 to 2007.
It explains why stocks are “only” up less than 1%. Real QE would have sparked a bigger rally (Bitcoin in particular would be up a lot more if Powell really indicated significant balance sheet growth going forward).
I continue to look at the JOLTs QUIT rate for October. It was 1.8%. You need to go back to January 2014 (outside of COVID) to get such a low QUIT rate. If this really is “crowd sourcing” the vast majority of workers, it is not indicative of strength. People are holding on to their jobs, rather than quitting for new jobs, because they think they won’t find one.
Yes, Powell is with us well into next year, but I expect the admin to step up the rhetoric for rate cuts once we start the new year (or maybe before). As discussed in ‘Twas The Night Before Fed Day, the Fed (and Treasury) will respond if longer-dated yields don’t respond well.
Let’s call it a mildish hawkish cut, with a pinch of bond buying to ease the pain, and knowledge that those closest to the admin were on the dovish side.
Stock and bond response – a bit of relief from pre-FOMC levels, makes sense.
Now we can watch the data and let the countdown to the Santa Rally begin. 😊
I do think the Oracle earnings call could be market moving as they are at the epicenter of the AI/Data Center buildout.
