Thoughts on Fed's next move and the $SPCX dip
Watching the $SPCX move today, down to 108.37, it's certainly got me thinking about the Fed's stance coming up. We've seen a pretty consistent hawkish tilt, but the market's been pricing in cuts for a while now. My gut feeling, looking at recent employment data and stubbornly sticky inflation reads, is that the Fed will likely maintain a 'higher for longer' narrative, even if they don't explicitly hike at the next meeting. I'd put the probability of them keeping rates unchanged, but with forward guidance leaning hawkish, at around 65-70%.
The alternative, a more dovish tone to support the economy, seems less probable right now given their dual mandate and the recent run of decent economic prints. A genuine shift towards dovishness, hinting at cuts sooner than expected, I'd peg at closer to 20-25%. The remaining 5-10% is for some unexpected curveball – maybe a surprisingly weak CPI print out of left field, or some geopolitical event that forces their hand. I'm not seeing any real signs of that right now though. It feels like we're in a holding pattern where the Fed needs more data before they can confidently signal a pivot, and the market is just itching for that signal.
The market's anticipation of cuts despite the Fed's consistent 'higher for longer' messaging seems like a disconnect. Perhaps the real question isn't if they'll cut, but when the market finally accepts they won't, and what that means for indices like $SPCX.