Will the Fed Pivot

Nothing has changed.

It’s important to understand what motivates a person or an entity to do what they do. The Fed is no different. Even though we have just witnessed three bank failures in a week, nothing that the Fed bases their decisions on raising or lowering rates has changed. Unemployment is at historic lows, inflation is still high vs the Feds target. So, what makes the news media think he will pivot?

The reality is, the Fed does not base its decisions on bank failures (I could be wrong and we could see a change of heart), but rather on what the Fed mandate is focused on and that is high inflation and low unemployment. A Fed pivot, I don’t see that happening.

The Yield Curve is still negative which puts pressure on the banks and their underling assets they hold till maturity. Yesterday the curve jumped to -.48. This is due to a drop in the 2yr Treasury bonds Yield.

How Should we Approach this?

Unemotionally and fact / data based. Nothing other then three bank failures has change that would change the overall landscape that would cause Fed to pivot and bank failures is not in their guidelines for policy change. I believe the data still points to more downside vs upside in markets. If Germany, United Kingdom, and Frances jump in Yields last night is any indication of what is to come in the coming days and weeks, I expect the 2yr Treasury Yield to go back to where it was last week along with the Yield Curve.