There Are Only Fed Traders in This Room!

As much as some folks try to play it cool and act like they are above noticing what The Fed is doing, the fact remains in this post-2008 era of central banking that The Fed is the main game in town.

Others often attempt to advance intelligent-sounding arguments about how The Fed is vastly overrated and really does not matter all that much to markets, but the fact remains that in front of every single Fed event, especially tomorrow's FOMC, there is considerable market speculation and positioning for it, not to mention countless times where it feels like the market is in a holding pattern leading up to the event. 

Someone once lamented on Twitter not too long ago that The Fed took the fun out of markets, making it wholly about their decisions and interventions in what is increasingly a command economy rather than laissez-faire market capitalism. 

In reality, it has always been a mixed economy here in America, albeit one which tilted more and more towards command after the 2008 bailouts and QE/ZIRP interventions, let alone the pandemic in 2020. 

Ultimately, this is the life we have chosen in markets, and it is what it is. 

Equities are well off session highs and back to oscillating around the flat-line as I write this. I have no idea whether we get a 25 or 50 bps cut tomorrow, and perhaps Powell does not either yet. 

Here is what I do believe: I suspect both a 25 and 50 bps cut will lead to increased volatility. The semiconductors were the quintessential leading sector since 2009. They topped out as a group in the second week of July and have not come close to breaching even their August highs on this latest bounce attempt. AAPL AMZN GOOGL MSFT have likely also put in good highs going forward, which has me at odds with the "one final blow-off" view many seem to espousing. 

Palladium is surging today as gold and silver pause lightly. Amid heightened volatility I expect to see fireworks to the upside in one or more commodities markets after the rate cuts, not unlike oil in the spring/summer of 2008.