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Image from CME Fedwatch, annotations by Mish.

Hopium Priced In

One hell of a lot of hopium is priced in. I expect the Fed to dash some of this hopium later today, so do others I follow.

Since the September SEP, a lot more cuts have been priced in, while the economic conditions haven't changed much.

With Dec '24 dot at 5.1% in Sep and the current median market expectation right around 4.25%, there is a significant likelihood of a tightening surprise on Wed. pic.twitter.com/0hRt6yXXa9

— Bob Elliott (@BobEUnlimited) December 11, 2023

Powell a Hero?

I highly doubt Powell does much of anything today but repeat what he said in November.

— Mike "Mish" Shedlock (@MishGEA) December 13, 2023

Powell will not be a hero no matter what he does. The Powell Fed blew it, like the Yellen Fed, and the Bernanke Fed, and the Greenspan Fed.

Is It Possible Rates Dive to 4.25 Percent?

Of course it is. But that implies bank failures or big economic stress, neither of which would be good for the equity markets.

Hopium is misplaced. And I expect the Fed to dash a bit of it in a few hours. Place your bets.

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