FOMC Highlights:

-Taper accelerated to $30B (up from $15B)
-Dot plot shows and extra hike in 2022 to 3 (up from 2)
-The Fed will not hike rates if A. the Economy cannot withstand one and B. Not until the USA has reached FULL EMPLOYMENT

That last part was the “olive branch” to the bulls. There’s plenty of ambiguity around the definition of “Full Employment”, and when asked about it in the Q&A…Powell bobbed and weaved. Powell even went as far as saying something to the effect that they “didn’t want to roil markets”. That was good enough for a +2.00% rally across the board in the broader stock indices.

Interest Rates: This is going to be fairly unpopular with many, and always subject to change, but my bias still lies on the side of the “bond bulls” at the moment. Why? Well for one thing, bond yields have the tendency to remain “range bound” as growth continues to accel, but the Inflation component of the economy begins to cool. Furthermore, we believe there is going to be a pending shift to Scenario 4 aka Risk-Off backdrop headed into Q2 2022 – which in that case, it’s a clear cut BUY TREASURIES. Once again, this is akin to Q4 2018 – when the FED went HAWKISH right at the cycle TOP! While consensus was bearish bonds (because the Fed was Hawkish obviously), we were BULLISH bonds because we had the highest probability suggesting that the cycle was COOLING and we were moving to Scenario 4 in spite of the Fed being too HAWKISH. You got that? So in essence you could say that the Fed is a HAWKISH as they’re going to be RIGHT NOW.

Side note: The BOE raised interest rates to 0.25% vs 0.10% exp. EVEN in light of the Omicron breakout in the UK. So maybe that should tell you something about how central banks are going to set policy even in the face of Covid19 going forward.

I will be traveling today, but I’ll be in front of the market tomorrow for the morning session and into the close. So if there’s something actionable, you’ll get a signal, and you can call the desk for assistance.

All the best. Good luck.

800-669-5354312-373-5286Series 3 Licensed

John Caruso

Senior Market Strategist
Follow John on Twitter @JCarusoRJO. John began his career at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. John made his move to the commodity industry at the end of 2005, and began his path at Lind Waldock, at the time the largest retail brokerage division worldwide. John did his undergraduate work at Robert Morris University in Pennsylvania from 1999-2003, where he was a 4 year varsity basketball letterman.  A self-professed “Macro Trader”, John uses a multi-factor fundamental and “quantamental” trading model in distinguishing market cycles based upon the accelerations or decelerations of growth and inflation metrics. His technical and quantitative approach is heavily reliant upon trend and market range analysis via a custom built standard deviation system in helping him make probability-based market decisions. John is an avid reader of all things pertaining to finance, and behavioral economics. Click here to sign-up for John Caruso's Trading Coach Insights. Daily information and insight on all futures marketsin ranging from metals to equities.
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