Mum’s The Word: Kathryn Rooney Vera on Fed’s Second Meeting under Kevin Warsh, Plus Earnings Breakdown (Live Replay)
Episode publishedPodcast: Monetary Matters with Jack Far...Monetary Matters with Jack Farley
Transcript preview
Preview only
Wow. Alright. We are here. We are joined by Catherine Rooney Vera, who's the chief market strategist at Stonex Group. A lot of views on bond markets, everything in in macro. We, I mean, we can get to to currencies and bonds. Catherine had a very strong call that the Federal Reserve would not hike today. The market thought there was, like, a 30% chance or that was what at least what was priced into the market. I happen to agree with you, Catherine. I thought that those odds were far too high, and it appears that you were right. I mean, we we know that you were right. So congratulations on the g
I think there was, you know, there's some historical precedent that a Fed chair that comes in, tries to prove his inflation fighting credibility and hike. There's also been some pretty good data in terms of resiliency here in The U. S. So I think there was a combination of variables, but really 30%. The surprising thing is that, Jack, usually just before a Fed meeting, the market is fully convicted one way or the other. Here, it wasn't. I mean, 30% is kinda quibbling about whether or not it's going to happen. I talked to a few guys and gals saying 5050% odds, But if you look at economists, the
What did you make of the meeting? What were your broad conclusions?
I mean, it was interesting because the presser, he revealed or or chair Wash revealed very little, and you and I were talking beforehand. It was he he he kind of spoke at odds to his own statements here and there. And in and of in and of itself, that messaging, in my opinion, is telling. He repeated focus on market pricing, implying that he prefers markets to shape the expectations rather than the Fed attempting to lead them, but then said something a little bit different. I think that what we see in the market reaction is also very telling. We saw a sharp sharp rise in the thirty year treasur
So the long end of the bond market sold off, yields went up. The short end, two year yields went down. So the market is pricing in fewer hikes, a more dovish policy in the short term. And as a result, the long end is saying, woah. If the if the Fed is not gonna fight inflation, I mean, it doesn't matter how much Kevin Worsch talks. Like, if they they don't actually raise rates, why do I own a thirty year treasury?
That's exactly that's exactly what happened. And, you know, the markets prior to this meeting were forecasting, you know, very a 90% chance of a rate hike by year end, and now that's been taken back. So, yeah, the front end heard not happening, not today, not for the foreseeable future, and the back end heard inflation is going to be above 2% for the foreseeable future, and the Fed is losing inflation fighting credibility. So let's see what happens. I think that, I I I don't think it was a horrible presser. I, you know, I hear some other pundits saying saying he did very poorly. But, Jack, I d
So the world that we know so well, Catherine, the world where the Fed is going to signal what it is going to do and is very open and transparent about how it's perceiving data and its potential reaction function to that data. That world we we know so well, Catherine. Honestly, fondly, think think of it fondly. Yeah. It no longer exists. That's what you're saying. So in this world where the fed is not going to tell us any much, you know, the the the info has been reduced 80 to 90%, What does that mean? You you had a a piece where you wrote about how to position for a fed that says less and a cu
Yes, sir.
That's exactly right. What do we need to know about this new world that we're in broadly and then specifica
Keep exploring with a free account.
A free account preserves the short preview. Upgrade to Pro for the full transcript and episode chat.