Don’t Expect a Rate Hike this Week

This looks to be an interesting week with a Fed meeting, the first GDP report for Q1 and many more earnings reports. Express Scripts (ESRX) is due after the close.

The futures market currently thinks there’s a 1 in 43 chance that the Fed will raise rates this week. I’d put it close to 1 in 300, but that’s me. The futures market sees the odds rising to 1 in 2 at the Fed meeting five months from now. I suspect that the futures market may need to turn a bit more hawkish.

The next Fed meeting after this week will be just eight days before the big Brexit vote across the pond. The outlook is grim for much of Europe. Six months ago, analysts saw profits for the STOXX Europe 600 rising by 8.2% this year. That’s now down to -2.2%, and Morgan Stanley just said it will be -5%.

The Fed has projected that it will raise rates twice this year. Interestingly, the five-year “breakeven,” meaning the difference between the five-year Treasury and the five-year TIPs, has risen to 1.56%. That’s a nine-month high.

Posted by on April 25th, 2016 at 11:07 am


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