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Here’s what we’ve got for you today:

1. Fed Coffee Corner: November Meeting ☕

2. Fed Meeting Live Steam & Reaction 📽️

By the way, this article - Bill Ackman Moves Markets - is the most clicked link in this newsletter, you should check it out if you are interested.

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Rates Today 📉

Fed Coffee Corner: November Meeting ☕

In the Fed meeting yesterday, Jerome Powell announced that the Fed held interest rates at 5.25-5.5%.

Per tradition, the Fed Chairman’s statements were extremely underwhelming and predictable. He used the same formality indicating the need to be “data dependent” and stressed the Fed’s job to keep prices stable…blah blah blah.

JPow said - “The Fed will continue to assess additional information and its implications for monetary policy…additional policy firming may be appropriate to return inflation to 2 percent over time.”

This is the same commentary he has made since mid-summer. He is being careful to leave the door open to a potential rate hike in the future if the data warrants it.

So, What was the market reaction?

Interestingly, the market did not really react to the Chairman’s speech. Before he began speaking the market was already up 45bps on the day and remained elevated throughout the press conference. As I said, the comments he made were all predictable and he really didn’t have anything new to say.

What the market DID react to was the economic data that came in over the last week - and it reacted in a big way.

Since Monday, the market is up nearly 150bps. That is an extremely positive swing for interest rates - which are now the best they have been since the end of September.

The key data points that moved the market were:

1. ADP Jobs Report - 113k (forecasted at 150k)

2. Manufacturing PMI - 46.7 (forecasted at 49)

3. JOLTS Job Openings - 9.553M (forecasted 9.25M)

4. Jobless Claims - 217k (forecasted at 210k)

5. Continued Jobless Claims - 1818k (forecasted 1800k)

These data points were all positive for interest rates. They all indicate that the job market is getting worse, and that overall spending is decreasing. Both of these have negative affects on the economy - which is exactly what the Fed wants to curb inflation.

For my visual learners out there - here is the bond market over the last month. On the right, you can see the positive run we have been on. As this number rises, interest rates fall.

Even better news - there is, potentially, more room to run on this rally with the following economic data points coming out tomorrow (Friday Nov 3rd):

1. Non Farm Payrolls

2. Unemployment Rate

3. Mfg PMI

4. Global Services PMI

If these also show a slowing economy, there maybe even more improvements before the weekend.

What does it mean for December?

The next meeting is Dec 13th, just 41 days from now.

If we believe the Dot Plot the Fed released during their Sep meeting, there would be a rate hike coming in December.

According to CME Group, that is only about a 20% probability. Wall St and the stock market certainty believe the Fed is done hiking as stocks are ripping early this morning.

But…only time will tell.

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While the Fed meeting itself was less than newsworthy, the economic data surrounding the meeting has sent the 10yr Treasury falling - causing interest rates to fall rapidly for buyers looking at purchasing a new home.

This window that has opened may be the perfect time for any clients who have been on the fence about purchasing something over the last month or so. Most likely, they got preapprovals for around 7.875%-8% interest rates.

Today, it’s more likely to be around 7.5-7.625% - a huge improvement in their monthly payments.

Take advantage now, because we have seen how briskly the market has corrected itself before.

Fed Meeting Live Steam & Reaction 📽️

The Cul-de-Sac

Thanks for reading - that is all we have for today 😎

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— Michael F DiLucchio