The Fed under Kevin Warsh will not change rates for a while. CNBC surveyed some people who get paid to guess what the Fed will do. Those people said rates will stay put. Groundbreaking stuff.
The survey respondents do expect one thrilling development this week. The Fed might remove the easing bias from its statement. The easing bias is the part where they hint they might cut rates later. Removing it means they will hint at nothing instead. Financial markets will spend forty-eight hours analyzing whether hinting at nothing is different from previously hinting at something. Spoiler: it is not.
Warsh gets to sit in a chair and leave numbers unchanged while everyone pretends this constitutes monetary policy. The statement will swap twelve words for eleven different words that mean the exact same thing. Algos will read those eleven words in 0.003 seconds and move Treasury yields by four basis points. Retail traders will spend the afternoon reading Twitter threads about what "patient approach" really means in paragraph three.
None of this matters for your stock. Your stock goes up when more people buy it than sell it. Your stock goes down when more people sell it than buy it. The Fed statement does not change this.
But some guy with a CFA and a Bloomberg terminal will explain that removing the easing bias is actually bullish for small-cap value if you adjust for the inverted yield curve and Jupiter's position relative to the Russell 2000. He will be wrong. He was wrong last month. He will be wrong next month. You will listen to him anyway because his chart had three colors and a trendline.
Warsh could replace the entire statement with a single sentence that says "we are keeping rates the same because we feel like it" and your portfolio would perform identically. The survey respondents would still have jobs. CNBC would still cover it. You would still check your phone every six minutes wondering why your tech stock is down.
The Fed's next move will be whatever it is, and you will learn about it the same time as everyone else: after it has already happened and your position is already f*cked.
Photo by Markus Spiske on Unsplash
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