Fra Zerohedge:
The FOMC rate hike has come and gone, and, contrary to expectations, it was far more hawkish than many expected, not so much due to the actual 25bps tightening, or the one additional rate hike as forecast by the “dots”, bringing the total for 2017 to three, but due to Yellen’s hint that the economy no longer needs a fiscal stimulus, and as a result any excessive fiscal stimulus by Trump would lead to even more rate hikes.
That said, we remind readers what JPM warned yesterday, namely that it is not so much the Fed, or even the threat that Trump “stimulates” more than some expect, that is the biggest risk to the market, but whether he can get there in the first place.
And, to reiterate his point, here is this morning’s “early look at the market” from JPM’s Adam Crisafulli, which again states that “elevated political expectations are the single biggest risk facing the tape.”
Here is the key excerpt:
Asian equities mostly finished lower (w/the exception of Japan) while Eurozone equities and US futures have a mild bid. It was generally slow overnight as far as macro news is concerned w/most of the press focusing on digesting the Fed decision. In aggregate the FOMC was “hawkish” but not necessarily b/c of the added ’17 hike. Instead, some of the commentary from Yellen during the presser about the need for fiscal stimulus (she suggests the economy currently doesn’t need it) was more notable. In general though monetary policy isn’t driving the tape at present and (as was the case w/the ECB last week) the market’s Fed focus will likely quickly fade w/attention turning back to the precise scope, timing, and structure of the Trump/Ryan fiscal/regulatory agenda – this more than anything will determine whether the post-11/8 move can hold or whether the SPX will surrender its gain (it remains the case that elevated political expectations are the single biggest risk facing the tape).
Having covered this topic over the past month on several occasions, we agree, and we – like JPM – wonder how long until the “market” finally notices.
