Wall Street Reacts To A “Hawkish” Fed: “I Think People Are Scared”

Wednesday, December 19, 2018
By Paul Martin

by Tyler Durden
Wed, 12/19/2018

After a kneejerk reaction modestly higher, stocks have not only pared all their gains but are now at session lows following a Fed statement, and Powell press conference, that were both far more hawkish than expected. Below are some preliminary reactions from Wall Street strategists where the prevailing sentiment is “disappointing”, “not super dovish”, and “this will be seen as hawkish.”

Jeffrey Rosenberg, chief fixed income strategist for BlackRock: “The dots were a little bit disappointing”

“The most important thing is the dots. The dots met market expectations. A little bit of a disappointment in not seeing bigger reduction in terms of further gradual increases, just the introduction of some in there to soften it, there was bigger expectations there, but I think that’s minor relative to the dots. I think you got the dovish hike.”

Greg Staples, co-head of fixed income at DWS: “Fed dots show significant group still see 3 hikes for ’19: “

Even the downward revision in the FOMC’s rate projections has a hawkish tilt, said Greg Staples, co-head of Americas fixed income at DWS. Discussing the dot plot, he observed that while the median dot has dropped to imply two hikes in 2019, “there’s still a significant cadre within the Fed that thinks that three hikes will still be in the cards”
“The Fed is indicating that it’s listening to the markets, it has respect for the markets, but it’s not going to be ruled by the markets”; Staples sees potential for the curve to steepen somewhat, led by a decline in short-end yields.

Daniel Katzive, head of FX at BNP: “Hikes wasn’t super dovish”

The dollar’s rally on the Fed’s decision to raise interest rates was, in part, because the hike wasn’t “super-dovish”
“You avoided the super-dovish scenario and you got what the market was expecting,” Katzive told Bloomberg
The BNP strategist expects Jay Powell to “heavily emphasize” data-dependence at press conference; expects 1Q economic data will be good enough for another Fed hike, which he says implies that the dollar will hold up “pretty well”

The Rest…HERE

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