No More Fed Pivot this Year Boys (the market was previously pricing in rate cuts this year)

 

You dont really need to look at the fed watch tool (but it does help to see the accurate picture) – you can just infer this from looking at effective federal fund rate/1 year note/2 year note, etc. Really useful, because CME watch tool doesn’t update every second.

So what i do – Currently effective fed fundrate is 4.5~4.75. BUT one year yield has SOARED UP to 4.98% right? So that means, ON AVERAGE, from now till next year, the rate is going to be near 5%. If we see a fed pivot (in 2023), this value would be a lot lower. This means, fed is going prob going to keep the rates at +5%, meaning “higher for longer”

What’s priced in rn is two 25bp hikes currently. What we don’t know is whether the fed is going to further hike or not. We will see in the future.

I’ve shorted some buttcoin (stop loss ~25k, building more on the way up) because it’s a risk asset, and risk assets dont do well in high rate environment (risk off). I think it’s free money but we will see. Buttcoin has particularly done well recently (melt up) because the market was pricing in fed pivot, but what if the fed will keep rates high??

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Tech stocks have soared today. Yields have gone up. One of the two is wrong. I’m leaning to the former because of high jobs data/sticky inflation (especially the services, which is what the fed cares about). But we will see who is right

EDIT: Important – what you hear shit about the news is already priced in. If you want to make money, YOU need to figure out how THAT will change in the future – Currently the market is pricing in TWO 25 bp hikes. Basically slim chance of hiking 50 bp in march – but what if that figure is higher? I’m placing my bet that this probability will go up and will be playing my cards accordingly

 

h/t  RuckFeddi7

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