The DC Today - Wednesday, June 14, 2023
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
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🗓️ 14 June 2023
⏱️ 10 minutes
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Summary
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
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:14.3 | Well, hello and good evening, and welcome to D.C. today. Today is Wednesday, June 14th. And I'm lucky to get all of you here on |
| 0:24.6 | on Fed Day, highly anticipated day with the Federal Reserve released their statement and I'll kind of |
| 0:32.4 | walk through all of that. The markets last night following yesterday, CPI data, |
| 0:36.3 | inflation data that was a little bit |
| 0:37.6 | pretty much in line for a change. |
| 0:40.1 | You know, it had been coming in hotter for quite some time. |
| 0:42.7 | Futures last night were a little lower into the open, but really the market was just sort of |
| 0:47.2 | on pause most of the day until about 2 o'clock Eastern when the Fed sort of made their |
| 0:51.8 | announcement to keep rates unchanged. |
| 0:55.0 | They have increased rates now 10 consecutive meetings. |
| 0:58.6 | So this is sort of a first time in about a year and a half where they actually did something |
| 1:02.4 | different with keeping rates the same in about five to five and a quarter. |
| 1:06.4 | The market initially sold off. |
| 1:08.6 | This is kind of what we've seen that past many different days the Fed has come out with |
| 1:13.1 | an announcement, which is that the market initially knee-jerk reaction, sells off a ton, yields |
| 1:17.5 | rise, and then kind of markets participants are able to digest a little bit and understand |
| 1:22.6 | a little bit more about what's going on, kind of get through the press conference with the Fed, |
| 1:26.6 | and then we get |
| 1:27.8 | normalization through the end of the day, which is exactly what we saw the day. The Dow closed down |
| 1:32.9 | 232 points on the day, but probably half of that or more than half, probably like 140 points |
| 1:40.6 | of that, something like that was just related to one stock, which was United Healthcare. |
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