Financials –
I’m hard pressed to find much substance in yesterday’s FOMC statement. It seemed they walked a fine line and avoided sounding either especially dovish or hawkish. It is interesting to note that the Fed points out that economic activity has slowed, but then they go on to say that such slowing growth is likely to be transitory. Looking at the statement, I really don’t get the sense they wanted to give a definitive statement on the potential for a June rate hike.
That said, it sure seems like the market is now fully onboard a June rate hike. After the statement release, rate hike odds have surged from around 60% to roughly 94% at the time of writing. This is an interesting reaction because I didn’t view the statement as overly hawkish. I don’t necessarily think the reaction is wrong, but I would only point out that we know the Fed doesn’t want to surprise the market on anything so if the market is reacting “incorrectly” we will probably hear dovish comments from Fed speakers in the near future. I don’t see any comments due today, but several speakers are out tomorrow including Fed Chair Yellen.
In Washington today, we could get a vote on the House plan to repeal Obamacare as early as today. That said, it still doesn’t sound like anyone is 100% confident they have the votes needed to pass the plan. Obviously this will be a big hurdle for the administration and if the plan fails again, the market will probably not like it.
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