Morgan Stanley IM: Is the Fed Losing Patience and Is the Market Underpricing Another Rate Hike?
Jim Caron, Co-Lead Global Portfolio Manager and Co-Chief Investment Officer, Global Balanced Risk Control Team, shares his macro thematic views on key market drivers.31.10.2023 | 07:02 Uhr
- Let’s get right to the point - the Fed is not expected to hike at their meeting on November 1st, but that doesn’t mean it’s a non-event.
- In fact, we should view the November meeting as setting the stage for December, when the Fed will release their latest Summary of Economic Projections and dot plot.
- Today, the market is pricing roughly a 20% probability of a rate hike in December.
- However, I think those odds are too low and should be closer to 50%/50%.
- This means the November meeting is important because it sets the tone for the market to readjust the probability of a December rate hike higher, which will likely have an impact on market valuations.
- Truth be told, market pricing of Fed expectations has been wrong before, as evidenced over the last 18 months for example.
- So does the market have it wrong again? And if so, what are the implications? We discuss in this audiocast.
See below for important disclosures.