Later today we get the FED decision. Will they cut. Won't they. What's their outlook. What will Powell say?
Unlike former FED chairs Bernancke and Yellen, Powell FED days have, more often than not, seen selling. In July the markets crumbled when Powell said the rate cut was merely a mid-cycle adjustment.
The market was, and continues to hope for more cuts from the FED.
What is the FED going to do today?
If you asked that same question a few weeks ago the answer would be, with almost 100% agreement from the market, that the FED will cut rates .25% today.
However what a difference a few weeks make. Today the market is split almost 50/50 on staying pat and cutting rates .25%.
I think the wild card is the recent repo issues, with the FED having to step in yesterday and today to prime the market.
Could this open the door for the FED to re-launch some for of QE?
That would be the wild card today as far as the stock market is concerned. The mere mention of QE could send stocks flying higher. However no rate cut and a the usual Powell commentary will likely lead to another Powell plop.
And rest assured if the FED does nothing at all today, rumors will begin to swirl again about Powell getting the boot. That would certainly send stocks lower.
For today.... the odds are in the favor of the bears. At least short term after the FED. Powell has not been friendly for the stock market during FED days. The wildcard would be the mention of QE.
As it stands now according the CME:
- 58% chance of a rate CUT of .25%
- 42% chance the FED does nothing today.
By the end of the year:
- 3 more .25 rate cuts 8%
- 2 more .25 rate cuts 33%
- 1 more .25% rate cut 42%
- FED does nothing 15%