Traders priced in a 92% chance of a rate hike. They also priced in a 75% chance for December. They did this because they love percentages and feeling smart about the future.
Warsh faces a tough battle. The article does not specify what battle. The article does not specify who he's fighting. The Fed girds for an expected rate hike, which means they're preparing for something everyone already expects, which is the institutional equivalent of bracing yourself before sitting down in a chair.
The voting happens soon. Warsh will lose or win based on factors that have nothing to do with your portfolio. Your portfolio will move based on factors that have nothing to do with the voting. But retail traders will draw a straight line between these two unrelated events and call it analysis.
Somewhere right now a guy named Derek is updating his Excel spreadsheet with these probability numbers. He's adding a new tab called Fed Scenarios. He's color-coding cells. He's building a Monte Carlo simulation in a software he torrented. Derek will be wrong in a way that costs him real money, but at least his spreadsheet will have consistent formatting.
The Fed will hike rates or they won't. The market already moved on this information six weeks ago. Then it moved again last week on different information. Then it moved yesterday because a PMI number had a decimal point in the wrong place. By the time Warsh finishes his battle, everyone will be trading on whether some other Fed governor sneezed during a press conference.
Rate hikes don't kill bull markets, but watching CNBC for seventeen hours while refreshing your brokerage app does.
Photo by Markus Spiske on Unsplash
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