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Mar 22

Yields spike so the Fed will hike…and Fed chair Powell better throw a strike

  • March 22, 2023
  • CWM Investment Team
  • Richard Barrett

Over the course of the past 24hrs, odds have dramatically increased that the Fed will hike by +25bps at 2pm today.  2y UST yields two weeks ago were 5.2%.  Those quickly fell to 3.8% when Silicon Valley Bank imploded but 2y UST yields have been on the rise the past few days (now 4.2%).  The odds as presently quoted and implied by the bond market, FanDuel, and DraftKings now reflect a 90% implied probability that the Fed hikes +25bps today.

If the Fed paused and did nothing, it’s implied the banking situation is worse than feared.  If they did a +50bps hike it would be viewed as too much.  The market would have an allergic reaction to either of those outcomes.  At 2pm today the Fed will do +25bps hike and if Powell has any sense, he’ll sound dovish and recognize that the 16th largest bank in the USA went down on his watch within a day.  He better throw a strike at the press conference and sound less tough.  His margin of error here is razor thin.  I think this could be the end of the hiking cycle.

2pm ET today – enjoy the show.

Source: JonesTrading as of March 22, 2023

Richard Barrett
Chief Investment Officer

 


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    © Congress Wealth Advisor Solutions
    Congress Wealth Advisor Solutions (CWAS) is a division of Congress Wealth Management, LLC (CWM), which is a registered investment advisor with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. For additional information, please visit the Investment Adviser Public Disclosure website by searching with CWM's CRD #310873. Investment Advisory services are offered and rendered through CWM. CWM acquired Pinnacle Advisory Group, Inc. (Pinnacle) on April 30, 2021.