Weekly Market Pulse: Never Mind

I thought of Gilda Radner this past week. Actually, I thought of a character she created on the original Saturday Night Live, Emily Litella, who was a regular on the Weekend Update segment. She’d start to rant about something topical, getting it completely wrong at which point Jane Curtin or Chevy Chase would explain it to her and she’d respond. “Oh. Well. That’s completely different. Never mind.” (For those of you too young to remember Gilda, here’s a link. Radner was a rare talent taken from us too soon by ovarian cancer.) There is no better description of the market moves that happen in the week of a Fed meeting. There’s almost always an initial market move based on a knee-jerk interpretation (or misunderstanding) of the Fed’s statement or Jerome Powell’s press conference performance. And then after a little bit of reflection, the market seems to say, like Emily Litella, well that’s completely different, never mind. At which point all the previous movements get reversed and we’re back where we started as if the Fed didn’t really do or say anything of substance at all. Which is, of course, usually accurate and should have been obvious from the beginning. But the Fed has to talk and traders gotta trade so after every meeting we get the Emily Litella memorial market dance. You’d be better off taking Fed meeting week off and watching reruns of the first few seasons of SNL. 

And so, last week the Fed met, and for a few hours everyone thought it meant one thing but by the next day, everyone had decided that it didn’t mean that at all. In the end, bond yields barely moved and the outlook for the economy only changed mildly and I would say positively. The 10 year Treasury note yield was 1.46% on Monday and 1.45% on Friday. The yield rose from Monday to Wednesday and fell Thursday and Friday. The 10-year TIPS started the week yielding -0.85% and ended the week at -0.79%. If you take real yields as a proxy for real growth – and directionally that’s a good way to think of things – then real growth expectations rose on the week while inflation expectations fell slightly. And since that is what the Fed is trying to do – as if they had any control over such things – I’d say that was a pretty good week for the home team. But c’mon. We’re talking about 7 basis points here. It means as close to nothing as you can get without it actually being nothing. In other words…never mind.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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