September 23, 2014

Doug Kass post FOMC actions

Though the Federal Open Market Committee language is generally unchanged, I added back my S&P 500 (SPY) short and long ProShares UltraShort QQQ (QID). I did this principally based on the lifting in expectations for the federal funds rate to 1.375% by year-end 2015. 

The new fed funds forecast represents a larger gap relative to the federal funds futures market. This means the markets are behind the Fed in terms of tightening expectations.

Oddly, while gold, oil, the dollar and bonds took this as more hawkish, the U.S. stock market did not (and rallied).

My guess is that the stock market will come around and trade lower (after an impressive rally from the lows of 12-13 handles) on the higher fed funds forecast. 

Article originally published on Sep 17, 2014