US Federal Reserve

After numerous warnings from Goldman strategist David Kostin that stocks are expensive, most recently over the weekend when he wrote that  "investors will soon capitulate on their expectation of upside to 2017 EPS forecasts as they face the reality that the accretive impact from tax reform will not occur until 2018" and that "revisions to consensus EPS forecasts during the past few months have been negative for both 2017 and 2018" moments ago Goldman officially downagred equities.

Overheard in the Oval Office when Yellen unleashes her rate hike into dismal economic growth expectations tomorrow...

Since the last fed rate hike, bonds are lower, banks are best...

While Fed Funds futures imply a 100% probability that The Fed hikes rate by 25bps tomorrow, it appears questions over Trump's policy timeline combined with the collapse in GDP expectations has dragged expectations for another rate hike in June back to its lowest since the election...

As GDP growth expectations have plunged so April Fed Funds futures have tumbled - completely against the common sense that The Fed hikes into strength, not weakness...

But the lower chart shows the July futures not following the collapse and fading that disappointment.

Conceived several years ago, "buy the (fucking) dip" was a joke among traders seeking to explain the market's nearly-instant upward mean reversion, which as we have alleged since 2009, has been pushed higher by central bank policy and various HFT strats. Since then it has, sadly, become perhaps the only "explanation" for the behavior of the most bizarre market traders have ever encountered.

Luckily, the buy the dip quote-unquote "market" may be about to end, perhaps as soon as tomorrow, if Bank of America is right.

“It was the best of times, it was the worst of times, it was the age of wisdom,

it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity,…”

Charles Dickens

A Tale of Two Cities

I'm back -- Chris

This week’s meeting of the Federal Open Market Committee is being set up in the financial media as a contest between the anti-inflation tendency led by Fed Chair Janet Yellen and the pro-growth forces led by President Donald Trump.  Would that it were so.