Making Sense

"The Desire for more, the fear of missing out, the tendency to compare against others, the influence of the crowd and the dream of the sure thing - these factors are near universal. Thus they have a profound collective impact on most investors and markets. The result is mistakes and those mistakes are frequent, widespread and recurring." The FOMC Rate Decision was on expected lines but the surprising bit came out from the Summary of Economic Projections where 2024 FFR projections were revised higher to 5.10% from 4.60% and for 2025 , FFR was revised higher to 4.10% from 3.90% . The estimates of PCE were revised higher by 20 bps for 2024 and 10 bps for 2025.  At 5.10%, in light of the benign CPI Data and market pricing well in line with the Fed's revised guided path of 1 rate cut into 2024, 2024 FFR SEP was largely seen as an adjustment to the Fed's policy projection rather than new information which could be construed as hawkish .   15 of the 19 members were seen a...

FOMC announced the rate decision overnight. Fed acknowledged we are at peak rates and that they are looking at the durability of the decline and a strong Economy and Labor market allows them the time to assess the evolving outlook more thoroughly and not rush into a decision. Chair Powell in the press conference said “I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that.” Chair Powell also stated that FOMC would start in-dept discussion on balance sheet issues at the March meeting. The March meeting market implied FFR moved from 12 bps prior to the meeting to 9 bps. However, 140 bps of cumulative cuts are being priced into for 2024 with 25 bps of cuts into each policy starting May 2024 until Sept 2024 and another 35 bps in the last 2 policies. ADP employment was below estimates at 107K compared to 145K expected. The Treasury increased long-dated auction sizes in-line with estimates but no...

"The correctness of a decision cannot be judged from the outcome. Nevertheless, that's how people assess it. A good decision is one that's optimal at the time it's made, when the future is by definition unknown. Thus, correct decisions are often unsuccessful and vice versa" On Friday, U.S. PCE numbers came in line with consensus expectations rising 2.60% yoy and the Core PCE rose 2.93% yoy. The 3m and the 6m annualized rate is now below 2%.  Snapshot ▲ YoY ▲ MoM ▲ 3M Change ▲ 6m Change Headline PCE 2.60% 0.16% 0.51% 2.00% Core PCE 2.93% 0.17% 1.51% 1.85% Headline CPI 3.30% 0.30% 1.78% 3.30% Core CPI 3.90% 0.31% 3.29% 3.18% Pending Home Sales rose 8.30% mom from prior -0.30% and 1.30% yoy from prior -5.20%. The market impli...