Predictable - almost formulaic responses from the Fed, greeted the FOMC's decision to pause rate hikes, just as anticipated would be the case. Also the 'hawkish Statement' left the 'door open' to future rate hikes, as expected they would, but frankly if the economy continues gradual slippage, they'll likely not.

Freepik

Likewise our general forecast was for S&P to remain stable with hesitation in the immediate preceding hours, then likely sell-off regardless of the decision, incidentally. And that was expected to rebound sharply (starting during my post-Fed 2nd video)... with a chance of extending into Quarterly Expiration.

In any event, everyone has an opinion about 'ratcheting-up' capital expenses, which is likely now that rates 'probably' won't be going up, and these levels to a degree are, as periodically pointed-out, fairly normal for 'normal' business in times of stability. On top of that you have an AI frenzy, which is likely not over.

The economy is slowing, and the rhetoric from the Fed talking about yet-more hikes really sidesteps what's going on in the real world, including slower loans and 'credit quality' concerns. It doesn't have to be a 'technical' recession, just sloppy and that's especially so on Wall Street. Ah ha . . and that's part of why money managers (and certainly M&A folks) want to see things move upward.

To wit: the 'bite' of higher rates already got traction and it should persist.

Yesterday I mentioned warmer water and temperatures. Instead of a 'dot-plot' Fed chart, how about a 'temperature' comparison. This impacts finances as it will contribute to a sort of 'stagflation' globally where storms and heat (even I hate to say hurricanes) prevail, but that's a really I 'presume' the Fed knows.

In-sum: 

The Fed moved as projected 'ideal', a pause in hiking, a forward data dependency cloaked in a 'hawkish statement', and somewhat 'softish landing' scenario, barring other surprises than are evident so far.

Some pundits ponder why the Fed would talk tough and not hike rates. That's easy I think: they're fearful of both financial conditions and new Bank crisis, of course the Treasury and FDIC (plus Congress) are pressing them about that. They want a relatively quiescent Summer, as not possible with another crisis.

Market is behaving incredibly close to my general outline: firmer ahead of this day, get a 'pause' but a 'hawkish statement' and that's what we got. S&P sure is sort of parabolic, but it can stay that way longer than Bears have patience if the broader market fills in the action with slightly better breadth for just awhile.

Also expected S&P to sell-off (on news almost regardless), and then rebound especially with Quarterly Expiration immediately in-front of this market. More.

I might mention that this isn't only about rates 'higher for longer' which is really a known-known. This is also about China where oddly the State Department's 'confirmation' of Secretary Blinken's trip to China comes two weeks after we'd announced it. Oh sorry, how can they say it's news now? Anyway I thought it a very important diplomatic overture, and we'll see how it goes beyond some minimal agreements to augment contacts to avoid inadvertent 'clashes' of the military powers. We did believe this means no active conflict for the moment.

That is not to say there aren't 'next shoes to drop' on geopolitics (Belarus got the first nuclear weapons from Russia today...so there's that...) or any sort of other development. Also problematic is Iran stating they won't make a deal that compromises their 'nuclear industry', however that will be interpreted.

Bottom Line:

In the wake of the FOMC sidestep move, we await Quarterly Expiration, which could be more interesting albeit detached from prospects of a subsequent shakeout.

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