If you like volatility, you had to love this past week. After sliding 22 points on Tuesday, the market rebounded sharply on Wednesday, gave up those plus more on Thursday, and as of Friday is struggling to stay positive.
The spike on Wednesday followed the release of the FOMC minutes which confirmed “bad news is still good news” for the markets as global weakness is keeping the Fed from hiking rates. The surge out of the gate on Friday was again “Fed Speak” as Fed President William Dudley continued “dovish” comments suggesting no rush to hiking rates anytime soon. To wit:
“Caution is needed because of our limited ability to reduce the policy rate to respond to adverse developments, recognizing that we could also use forward guidance and balance sheet policies to provide additional accommodation if that proved warranted.
Although the downside risks have diminished since earlier in the year, I still judge the balance of risks to my inflation and growth outlooks to be tilted slightly to the downside.”
And with those “silky smooth” words, traders rushed to buy stocks as the risk of tighter monetary policy continues to pushed further out into the future. Like the cartoon shows, courtesy of Hedgeye, the only thing that matters to the markets right now is the Fed.
