Powell hawkish on FOMC as he saw little progress on jobs, inflation and housing... but roadmap to dovish "pause" remains same and likely

In the 36 hours since the November FOMC meeting, stocks are down -3.5% and bond yields are up with 10-year up 8bp to 4.13%. But these moves in prices do not reflect a far gloomier surge in investor sentiment.

  • The official FOMC statement made a "dovish" modification noting the committee will take into account "cumulative tightening" and "lag" and "economic and financial developments"
  • But Powell in the press conference spoke far more hawkishly and noted several times "it's premature to discuss pausing and it's not something we are thinking about."
  • As the chart below makes clear, equities fell and bond yields rose
  • Investors reacted bearishly and as our Head of Technical Strategy, Mark Newton, noted the equity put/call ratio surged to 1.14, the highest since March 2020
  • Fed funds futures rose and June 2023 target rate is now 5.15%, up from 5.02% pre-FOMC decision.
The chart in this report is only accessible to members

In 2022, it turns out that equity markets see sharp reactions to on FOMC day. And as this tweet by @carlquintanilla shows, it is all about the press conference.

The chart in this report is only accessible to members

DOVISH + HAWKISH: Powell stated no progress on labor, nor inflation, nor housing = hawk

FOMC Chair Powell was hawkish in his responses during the press conference but was counter to the more measured and arguably "dovish" FOMC statement.

The hawkish tone...
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