Pre-Market Plan [9/17]: Odds of 50BPs near 67% ahead of FOMC
Good Morning -
The Bond Market is pricing in near a 67% chance that we see a 50 basis point jumbo cut tomorrow. This implies that a big rate cut tomorrow has become the market’s base case.
A big rate cut tomorrow will definitely lessen the consumer burden from high mortgage rates, high credit card APRs, and also high interest rates on business loans. It would be a meaningful move to bolster consumer confidence - if the Fed is not behind the curve.
There hasn’t been any major economic data since last week’s CPI in-line data to add to the case for a big rate cut, and consumer confidence released Friday was relatively strong compared to prior months.
If the Fed is to cut 50BPs tomorrow and conveys in the press conference that this is the first step of Stimulus to reignite growth, the market may have more legs in the current rally. If they are doing so because they believe that they may be behind the curve, then that is a completely different story.
Within my coverage universe, Microsoft did a new massive share repurchase program yesterday evening while Apple’s iPhone 16 buzz is not living up to lofty expectations from previous iPhone launches.
Microsoft’s large share repurchase program provides fundamental ammunition for NQ/QQQ ETF to continue its recent recovery trajectory given its large weighting in the index.
Today in our Member's note, we’ll discuss if any hedges may offer protection in case the market has a volatile reaction to tomorrow’s FOMC.
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