To The Moon

Since the November FOMC meeting, market expectations for future rate hikes have changed slightly, as shown in the table below, from the day after the last FOMC meeting to the end of last week: Notable changes include: Modest expectations for a 25 basis point rate hike by January (32.5 per cent) have shifted to slightly narrower expectations for a rate cut (4.8 per cent). The rate cut was not fully priced in until July. Market expectations for a rate hike in March have shifted from 11.7 per cent to 49.4 per cent. Interest rate expectations fell 25 basis points in December to 4.334% from 4.543%. In other words, there will be one rate cut in 2024. The chart below shows the pace of the current quantitative tightening (QT) of the Fed's balance sheet. The latter table shows the SPX's reaction to recent FOMC meetings. This week is the quarterly due date, so bold dates may be more influential. SPX option data for this week's expiration shows a peak volume at 4,600 points, which could trigger incremental selling of call options.