We discuss: why the "hawkish" take by markets from FOMC ultimately reverses in the next few weeks. There are 3 reasons, but the most important is the Fed funds YE 2024 is higher by +50bp because growth is raised by +40bp. Wouldn't it be worse if Fed raised GDP view but did not raise Fed funds?
Please click below to view today’s Macro Minute (Duration: 8:54).
Since the FOMC rate decision (2 trading days), the S&P 500 is down -2.5% and down -4% for the month. The market's viewed the September FOMC rate decision (and summary economic projections, or SEP) hawkishly. Stocks have been under pressure the entire month as US 10-yr yields relentlessly marched higher from 4.0% to nearly 4.5%. Unfortunately, our expectation for equities to gain post-FOMC did not materialize.For reasons we discuss below, we view the magnitude of the equity decline and commensurate surge in yields disproportionate to the FOMC rate decision and press conference. Understandably, this sounds like a tall order. After all, yields on the US treasuries surged to multidecade highs ye...