Everyone is panicking about the hike but the hike is already priced in.
Over 90% odds of a 25 bps increase.
When everybody knows the answer, the answer doesn’t move the market.
What comes after does.
3 things I’m looking at:
1. Dot Plot
Is this one and done or will the Fed go for more hikes?
That’s going to matter much more than the 25 bps itself.
2. Committee vote
The vote will give us more clues about how the committee is thinking about future hikes.
If we see more members pushing for additional tightening, that could send a much more hawkish message to the market.
3. FOMC conference
What Warsh has to say will be very important.
Oil prices are going up which could lead to even higher inflation in the future, but it still depends on what the Fed says about it.
If Warsh says inflation is under control and this is just a temporary spike, market could go up.
If he says inflation could stay elevated and more hikes could be needed, then buckle up. Market could take a nose dive.
So how do you deal with all of this?
This is what I’m doing personally.
I currently have low exposure in the market and I’m not looking for new positions unless I get some clear direction.
Keep your exposure low.
No over leverage.
Have stops in place.
Add more when the market gives you confirmation.
Over 90% odds of a 25 bps increase.
When everybody knows the answer, the answer doesn’t move the market.
What comes after does.
3 things I’m looking at:
1. Dot Plot
Is this one and done or will the Fed go for more hikes?
That’s going to matter much more than the 25 bps itself.
2. Committee vote
The vote will give us more clues about how the committee is thinking about future hikes.
If we see more members pushing for additional tightening, that could send a much more hawkish message to the market.
3. FOMC conference
What Warsh has to say will be very important.
Oil prices are going up which could lead to even higher inflation in the future, but it still depends on what the Fed says about it.
If Warsh says inflation is under control and this is just a temporary spike, market could go up.
If he says inflation could stay elevated and more hikes could be needed, then buckle up. Market could take a nose dive.
So how do you deal with all of this?
This is what I’m doing personally.
I currently have low exposure in the market and I’m not looking for new positions unless I get some clear direction.
Keep your exposure low.
No over leverage.
Have stops in place.
Add more when the market gives you confirmation.