12/14/2022 – A negative day with the Dow Jones down 142 points (-0.42%) and the Nasdaq down 85 points (-0.76%) 

The FED didn’t give us much of anything today. Just another word salad. With that in mind, and as we have discussed over the past few weeks, they are all but caught up to the short end of the curve. 

This is now evident to most……

A Stunned Wall Street Reacts To The Unexpectedly Hawkish Fed

As the first kneejerk reactions to the final Fed statement of 2022 come in, the consensus is clear: after the recent Brookings comments from Powell and yesterday’s CPI miss, few expected the Fed to come out as guns blazing hawkish, as it did, despite shaving off 25bps from it recent 75bps rate hikes (largely the result of the sharp easing in financial conditions over the past two months which the Fed is clearly unhappy with).

The market’s reaction was swift, pushing both terminal rate expectations higher and hawkishly adjusting rate-cut expectations…

What happens next reminds me of a Mexican Standoff. At least as of right now. 

The short end of the yield curve suggests the FED is done or nearly so. Yet, the FED continues to insist they will hike well into next year. Our mathematical and timing TNX work shows 10-Year yields will continue to fall well into 2023. If the short-term follows or even remains stationary, the FED will be forced to pause. Recent deceleration in inflationary forces point in this direction as well. 

Alternatively, the FED can simply ignore the markets and crash them in the process. 

Who will win?  

Well, trying to make money based on what the FED will or will not do is incredibly hard. Our mathematical and timing work is not. It clearly shows what the stock market will do in both price and time over the next few months. If you would like to see, please Click Here.