Episode 640: The DC Today - Wednesday, June 14, 2023

Today's Post - https://bahnsen.co/467JeWa

Brian Szytel here with you on today’s highly anticipated Fed Day. After 10 back-to-back rate increases from the Fed over the past year and a half where they raised short-term rates from 0% to just over 5% the Fed today paused (not necessarily ended) their rate tightening campaign with a ‘wait and see’ message on how their policy changes which operate with a lag will further affect the economy before their next meeting in July. The hawkish language in the statement and in the press conference afterward however left the door wide open for further rate increases should the data warrant. Main takeaways here:

The median forecast for terminal Fed funds in the Fed dot plots was raised to 5.6% by the end of this year, 4.6% by the end of 2024, and 3.2% by the end of 2025. Only two committee members saw the current rate as appropriate, with all remaining 16 members supporting further 25 bps rate increases before the end of the year, nine of which saw two more 25 bps hikes. GDP estimate was revised UP to 1% from .4%. The unemployment estimate was revised DOWN to 4.1% from 4.5%.

At the end of the day, 1. actions speak louder than words and I think they want to be done and 2. the economic outlook on growth and employment was upgraded not downgraded. Markets had been slightly positive most of the trading day (other than the DOW that was dragged down by just one price-weighted stock), then initially sold off over 400 points following the statement with yields rising, only then to normalize into the close. Wash, rinse, and repeat on almost every Fed day. I unpack all the nuance and what to make of it all in markets in greater detail in the video podcast link below.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com