July 27, 2022
Good morning,
Overnight Futures are up about one percent and indicate the S&P 500 Index is virtually unchanged from where it started the week. There’s no surprise there, this is a Fed Week, and little was expected from the markets ahead of today’s announcement.
It seems like a virtual certainty that the FOMC will raise rates by 75 bps today. The important information for the markets is how they guide for the rest of the year and perhaps into 2023. Probably the best case for bulls (the rate-cut campers) would be an acknowledgement from Powell that with so much uncertainty out there, literally anything is possible beyond a horizon of a few months. A less friendly result would be a re-iteration of labor market strength, a stated willingness to sustain a period of weak growth or worse in the campaign to conquer inflation, and a dismissal of the notion that rate cuts are even conceivable at this point.
Having said that, Chair Powell did dismiss the chances of 75 bps rate hikes as recently as May, and here we are about to get our second one in a row. Let’s get through today’s Fed meeting before we look at the probabilities for the next leg up or down for the equity market.
Be well,
Mike