A Market at Odds with Itself
We are struck by the somewhat contrasting and possibly contradictory concerns that appear to be plaguing the markets at the moment. On the one hand, the Fed has upped its rhetoric that all meetings are live; 2-3 hikes are a good proxy for investors to take into the 2nd half of the year; the economy is chugging along as expected; and June may in fact be a compelling point to restart the normalization process. This has been reinforced by the barrage of regional Fed presidents over the past few weeks who have stayed on message in stating that each meeting is live and the dots reflect the current thinking of the FOMC. These speakers have also not been limited to the hawks on the committee, with moderates and doves including Lockard, Williams and Kaplan holding to this message. Of course, we have learned that the Chair and Vice Chair are the most important voices, and neither Yellen nor Fischer have spoken recently. This is set to change with Fischer scheduled to speak tomorrow (Thursday) morning, and Yellen is expected to give the commencement speech at Harvard, which will likely nt contain many policy clues. Instead, she is not scheduled to speak in a financial setting until early June. The market is also placing added importance to Dudley’s comments tomorrow as his engagement was just recently added to the calendar, fueling a litany of conspiracy theories that he will signal a June move. We have attached the upcoming speaker calendar through the end of the month, which is chock-full of Fed speak.