Data from CME Fedwatch, chart by Mish

Weighted Average Chart Notes

• Data is from CME Fedwatch
• The dates shown are from snapshots I took on those dates
• Starting today, I added May and June of 2024 so there is only one bar for those dates, reflective of September 11, 2023.

Weighted Average Example

(Click on image to enlarge)

How Perceptions Have Changed

On March 24, 2023, the market thought the March 20, 2024 interest rate would be 3.62 percent.

Today, the market thinks the rate on March 20, 2024 will be 5.38 percent. That’s a huge difference of 1.76 percentage points, the equivalent of 7 quarter point hikes.

Higher for Longer

The market has firmly bought into the idea of higher for longer. So have my Twitter followers.

In 9 days the Fed will stand pat.

Then what?
Will the next Fed move from unchanged be higher or lower?

— Mike "Mish" Shedlock (@MishGEA) September 10, 2023

With one hour left, and 174 votes in, 61.5 percent of respondents think the Fed’s next move will be a hike.

The current rate is 525-550. Call it 5.375 percent. The December expectation is 5.50 percent, an eighth of a point higher and that’s as high as it gets.

But the Fed won’t hike or cut by an eighth.

Looking ahead to June 12, 2024, the market anticipates the Fed’s first quarter point cut, back to 5.13 percent from the current 5.375 percent.

Goldilocks Through Mid-2024?

That’s the market perception right now with no more than an eighth of a point difference in any month between now and March 2024.

Nine months of Goldilocks’ complacency is too much to expect.

The Fed will be put to a test in one direction or the other. Regardless of which way, I don’t believe it will be good for stocks.

Tough Budget Deficit Talk by Hard Line Republicans, Ignore It

Meanwhile please ignore the clown show and Tough Budget Deficit Talk by Hard Line Republicans.

If you want something to worry about look no further than the UAW Gearing Up for a Strike,

I think the strike will be long and nasty. If accurate, GDP will take a big hit. If there is a quick settlement, expect much more inflation. Place your bets.

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