Ok, well that worked out well…
Fed on hold? Just buy it all, dammit. And here’s the VIX:
Poor volatility - we’re starting to feel sorry for it. Here’s the full bullet point summary for anyone who missed it:
FED SAYS NEAR-TERM RISKS TO OUTLOOK ‘APPEAR ROUGHLY BALANCED’
FED: HIKE CASE HAS STRENGTHENED AS FORECAST SHOWS ’16 INCREASE
FED: DECIDED TO WAIT ‘FOR THE TIME BEING’ FOR MORE EVIDENCE
USD DROPS AFTER FED LEAVES RATES UNCHANGED; NEW LOW VS EUR
FED FUND FUTURES PRICE LESS THAN 50/50 CHANCE OF DECEMBER HIKE
YELLEN: FOMC POLICY SHOULD HELP ECONOMY MOVE TOWARD GOALS
YELLEN: ECONOMIC GROWTH APPEARS TO HAVE PICKED UP
YELLEN: MOST OF US JUDGED IMMEDIATE CASE FOR RATE HIKE STRONGER
YELLEN SEES ONE RATE HIKE THIS YR IF LABOR GAINS, NO NEW RISKS
YELLEN: ON CURRENT COURSE, SOME GRADUAL HIKES WILL BE WARRANTED
YELLEN: WE WILL DECIDE IN NOV. WHETHER A HIKE IS WARRANTED
YELLEN: WE HAVE SEEN SOME MODEST PICKUP IN WAGE GROWTH
There you go. And just as we write this, the Nasdaq hits an all-time high. This was the immediate reaction in FX markets via Citi:
(Chart: Citi)
There were three dissents (which is a lot comparatively): Esther George, Loretta Mester, and Eric Rosengren. Here’s Bloomberg with a nice graphic showing the shift in the dots:
(Chart: Bloomberg)
You can see the downward shift.
GDP forecasts were cut, and on, and on. Nevertheless not everyone sees this has at all dovish.
“The FOMC statement is unambiguously hawkish”, Pantheon Macroeconomics says, adding that “the base case for next Fed rate increase remains December, though hard to rule out a Nov. 2 hike, given language in the statement today.”
We’re not sure if that’s supposed to be a joke or not, but yes it is hard to rule out a November 2 hike, do you know why? Because there’s an election six days later. As an aside, Yellen went out of her way in the presser to ensure us all that the Fed is truly apolitical.
Here’s CIBC’s take: “We continue to view December as the most likely timing for the next rate hike, although that’s contingent on a rebound in economic data.”
Back to rates, here’s Bloomberg with a summary:
“USTs Bull Flatten After Fed Lowers Rate Forecasts”
“UST curve reached flattest levels of the session heading into the close after digesting both BOJ and FOMC policy meetings; 5s30s breached 120bp, flatter by ~3.5bp, while 10Y yields at ~1.66% were below closing levels since Sept. 8.”
In the end we suppose the Fed (and the market) got what they wanted. We closed higher by triple-digits on the Dow.
As for Kuroda, well, sorry man. Rough day: