Market and Macro Overview - The Fight Against Inflation Is On
ES had a massive movement down into price agreement target of apx 4000 into the FOMC minutes release.
PPI and jobs data were worse than expect and market continued in irrational exuberance until turning down into the minutes release, breaking the bullish trend after the last FOMC meeting. At the FOMC meeting powell used the word "Disinflationary" 11 times. Markets caught onto this as a signal of the end of the rate hiking cycle, although powell was very clear that there was more to go, that 2% inflation was the target and that they would not budge.
After the FOMC meeting, and after jobs data, Powell spoke at the economic club. There he used the word "disinflationary" one more time, however his messaging turned more hawkish there after seeing the jobs data.
The pieces in that meeting that I caught were:
- 2% target won't budge. This is different than what you're hearing from europe, where there is more exploration of the idea of changing target inflation in the near term.
- Powell confirmed for me my suspicion that the fed is especially targeting inflation expectations more than the CPI data itself.
I believe they made a terrible error in the messaging around the .25bps hike... They failed to continue to target inflation expectations. The PPI data is signalling incoming rebound inflation as well.
Today:
PCE being hotter than expected drove some selling pressure for a 1% drop in the ES and 1.7% drop in the NQ. Risk off.
I expect a continued bearish sentiment as fear sweeps through the market over the next 48 hours. At some point the reality of high terminal funding rate (up to 5.75 on the dot plots, and likely going up from that!!!) has to shake the market back into sanity. The FOMC meeting mid-late march will likely provide a good shake to any left feeling like the bull run is on.
PPI and jobs data were worse than expect and market continued in irrational exuberance until turning down into the minutes release, breaking the bullish trend after the last FOMC meeting. At the FOMC meeting powell used the word "Disinflationary" 11 times. Markets caught onto this as a signal of the end of the rate hiking cycle, although powell was very clear that there was more to go, that 2% inflation was the target and that they would not budge.
After the FOMC meeting, and after jobs data, Powell spoke at the economic club. There he used the word "disinflationary" one more time, however his messaging turned more hawkish there after seeing the jobs data.
The pieces in that meeting that I caught were:
- 2% target won't budge. This is different than what you're hearing from europe, where there is more exploration of the idea of changing target inflation in the near term.
- Powell confirmed for me my suspicion that the fed is especially targeting inflation expectations more than the CPI data itself.
I believe they made a terrible error in the messaging around the .25bps hike... They failed to continue to target inflation expectations. The PPI data is signalling incoming rebound inflation as well.
Today:
PCE being hotter than expected drove some selling pressure for a 1% drop in the ES and 1.7% drop in the NQ. Risk off.
I expect a continued bearish sentiment as fear sweeps through the market over the next 48 hours. At some point the reality of high terminal funding rate (up to 5.75 on the dot plots, and likely going up from that!!!) has to shake the market back into sanity. The FOMC meeting mid-late march will likely provide a good shake to any left feeling like the bull run is on.