Yesterday was another session that began with trepidation, only to end in a flurry of buying.

And the Magnificent Seven returns. Some are asking: ‘please never leave.’

Dot Plot

The infamous Fed’s Dot Plot got decidedly more hawkish in September, suggesting only a 2.7 basis point decline in Fed funds to 2.9% by the end of 2026.

Fed Funds Target	2023	2024	2025	Long Run / 2026
June	5.6	4.6	3.4	2.5
September	5.6	5.1	3.9	2.9

With a closer look at the ‘dots’, one can see two distinct camps:

• Six Hawks
• 13 Doves

The question is: which camp has the moment today?

These days, everyone is playing the fed rate cut guessing game. A Reuters Poll of 500 bond economists released a day ago sees the following:

• (blue circle) 10-year yield at 3.88% twelve months from now (last month, it was 4.00%).
• (red circle) Fed Funds rate cut 120-basis points (last month, it was 70 bps).

So, investors know there will not be a hike today and many think Powell will hint at rate cuts. That’s aided the Volatility Index (VIX) easing down to the lowest level in decades.

Rally Baton or More Hurdles

According to Bespoke Research, the market has rallied 9.6% since the November Federal Open Market Committee (FOMC) gathering. That is the best post-FOMC meeting move since August 2009 (10.4%).

Can that continue, or will it be why Powell puts hurdles in the way?

Powell plays it safe, but the Street will view it positively.

Today’s Session

The Produce Price Index (PPI) report shows a cool down in inflation prices. Overall, this, and yesterday’s CPI, may give confidence to the Fed.

All categories continue to see a decline. Services and other goods price slowed as well.

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