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First Sell-Side Responses To FOMC Trickle In: "This Should Be A Risk Off Trade"

Tyler Durden's picture




 

The initial reactions from the sell-side are arriving and while CNBC's Bob Pisani believes "this is very bullish" the sell-side appears to disagree.

First Goldman:

Looks a bit more hawkish to us... Do note inflation expectations have come down. Forward guidance… considerable time following end of  purchase program this month. Plosser and Fischer voted in favor aka must be sufficiently happy with something else in the statement? Kocherlakota only dissent

Deutsche's Lavorgna can't even find an excuse to push out liftoff...

Citi Warns:

Fed comes in with a bit of a Hawkish tilt as it rids of key policy line around labor market and keeps “considerable time.”  The buying program has ended. Hawks Fisher and Plosser voted for the action, while Kocherlakota  voted against it, which is a flip from recent votes.

 

“The dove dissenting says it all,” trader quips.

And Brean Capital's Peter Tchir adds:

Hawkish statement:

1) QE gone.

 

2) The hawks were on board, and a dove took the time to dissent - in our Fed "U" shape pattern, we think the shift to hawkish overall Fed has commenced and the pure hawks are appeased and winning and the pure doves, losing.

 

3) Job highlighted and as Yellen said back at Jackson Hole - structural unemployment is higher than she thought, so less slack, and as San Fran Fed said recently, when a period occurs where wages were sticky, once they finally start to rise, it happens very quickly

Is March back on the table? If they are only fighting inflation now, they have less ability to enact more dovish policy.
 
I think this should be a "risk off" trade. 
 
Initial reaction might be "risk on" as they are touting the economy and growth and talk about a great GDP print tomorrow, but
 
Growth going forward is frought with risk, especially with a less helpful Fed, which will support the long end of treasuries - not the front end.
 
The market started its big reversal on Bullard's comments and I find it hard to believe that having his comments not be reflected at all in the statement means we have to head back lower.
 
HY has been a bit heavy past few days, and since we never saw a true "clearing level" we should see that.

  • Short HYG/JNK or TRS.
  • Curve flatteners look great to me.
  • Strong dollar.
  • Weak commodities.
  • Short risk.

*  *  *

And Renaissance Macro notes: Fed Statement ‘Neutral to Marginally Hawkish’

“Stronger language” on labor mkt “partially offset by the retention of the considerable time language,” Neil Dutta, economist at Renaissance Macro Research, writes in note.

 

The phrase considerable time is now “more explicitly tied to data dependence”

*  *  *

 

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Wed, 10/29/2014 - 14:33 | 5390849 Deathrips
Deathrips's picture

10 Year going up!

Hope interest rates bend the fed over.

Spender..you want stronger or weaker FIAT?

RIPS

Wed, 10/29/2014 - 14:38 | 5390864 Relentless101
Relentless101's picture

And they're off and running.

Wed, 10/29/2014 - 15:00 | 5390921 spastic_colon
spastic_colon's picture

its because they know that EVERY single future statistical data point will come in WORSE than expected, thereby continuing the QE thru data manipulation mark my words.....that way EVERY financial news network will have cover to copy and paste the headline "Rate Hike Put On Hold; Could QE4 Be Next?"

 

"The phrase considerable time is now “more explicitly tied to data dependence"....indeed

Wed, 10/29/2014 - 15:54 | 5391160 Keyser
Keyser's picture

And of course metals get hammered on this news... 

Wed, 10/29/2014 - 17:02 | 5391364 Karlus
Karlus's picture

Metals get hammered on ALL news

Wed, 10/29/2014 - 14:37 | 5390868 Divided States ...
Divided States of America's picture

Edward Quince maybe dead but 'Edgar Quickle' is still alive....the markets will close green today and then Bob Pisani will prance around like a cheap cheerleader after their team scored a TD.

Wed, 10/29/2014 - 14:37 | 5390869 Bell's 2 hearted
Bell's 2 hearted's picture

i'm long and strong on the long end

 

the first moves are generally feints

 

anyways, any sustained move up will crush the housing market ... and crater rates (again)

Wed, 10/29/2014 - 14:48 | 5390906 aVileRat
aVileRat's picture

I would suspect a guy called Jeff and another guy called Larry would approve of this message, if they posted.

Time to watch if these mythical bear rallies have truth, or if they are just another reflexive technician wet dream. I'm betting: no.

 

Wed, 10/29/2014 - 14:41 | 5390883 SheepDog-One
SheepDog-One's picture

'Spender'? Fuck I wish!

Wed, 10/29/2014 - 15:21 | 5391039 frankTHE COIN
frankTHE COIN's picture

Bi.

Wed, 10/29/2014 - 15:33 | 5391088 LawsofPhysics
LawsofPhysics's picture

"Up" to what?  Oh, 2.34%...

< fucking yawn >

Wed, 10/29/2014 - 14:33 | 5390859 john_connor
john_connor's picture

Air pockets

Wed, 10/29/2014 - 14:35 | 5390860 Bell's 2 hearted
Bell&#039;s 2 hearted's picture

" remains on track for mid-2015 fed funds liftoff."

 

really?

 

how about (at best) a couple of quarter point ceremonial moves ... declare victory ... and go home

Wed, 10/29/2014 - 15:51 | 5391153 McCormick No. 9
McCormick No. 9's picture

So, what about a (temporary) end to QE with no commensurate raise in interest rates?

Equities immediately slump (er, nosedive) without Fed-derived liquidity pressure to keep them up, then...

Bond yields surge as risk increases... suddenly it doesn't matter what the Fed funds rate is, there's no liquidity, no-one wants to lend to anyone else. Then...

QE IV BITCHEZ!!!! (The "IV" stands for "IntraVenous", since the system is on life support.

 

 

Wed, 10/29/2014 - 14:38 | 5390870 LawsofPhysics
LawsofPhysics's picture

"This should be a risk-off trade"...

Well, yes, if the NYSE was fucking relevant or a real market for price discovery.

Wed, 10/29/2014 - 14:40 | 5390876 SheepDog-One
SheepDog-One's picture

'Bullish....very bullish indeed!' sez CNBC top stawk pimps. Yea whatever, as Chief Dan George said 'If its so good, then YOU drink it!'

Wed, 10/29/2014 - 14:44 | 5390896 Ness.
Ness.'s picture

'Risk-off' implies there is risk.  I can hear the laughter ringing through the halls of TBTF trading desks.

 

"Laughable Man"  ~ Jesus Quintana

https://www.youtube.com/watch?v=BThyoLS8u5o

Wed, 10/29/2014 - 14:44 | 5390902 ZoroAustrian
ZoroAustrian's picture

It's a 'gold off' trade.  Because every trade is a gold off trade.  The Fed is omnipotent and benevolent and all that ...

Wed, 10/29/2014 - 14:49 | 5390920 SheepDog-One
SheepDog-One's picture

All hail Fed The Merciful!!

Wed, 10/29/2014 - 14:52 | 5390918 Squid Viscous
Squid Viscous's picture

reminds me of downing pitchers of beer before driver's ed... there's another guy with the steering wheel, so RISK ON!

Wed, 10/29/2014 - 14:50 | 5390925 Dr. Engali
Dr. Engali's picture

Taking moar profis bitchez. Time to raise a little cash.

Wed, 10/29/2014 - 15:03 | 5390965 Kreditanstalt
Kreditanstalt's picture

Funny..."risk off" somehow never seems to include selling stocks...

Wed, 10/29/2014 - 15:34 | 5391085 Jahbulon
Jahbulon's picture

Where is the crash we kept hearing about when QE ends?

Wed, 10/29/2014 - 15:49 | 5391141 farmboy
farmboy's picture

Turkeys do not vote for Christmas. Shorts rates will not rise for a long long time.

Wed, 10/29/2014 - 15:57 | 5391172 the grateful un...
the grateful unemployed's picture

funny just as we are seeing some firmness in wages, minimum wage legislation (perhaps they might legilstate higher wages for everyone?) then the fed decides to ditch the language (well it was a phony political gesture anyway) i am also pretty sure no one is going to respect the equivalent rents clause attached to the housing inflation factor either, remember when home prices jumped, the BLS said theres no inflation, because rents are cheap, now rents are outpacing home prices, so throw that out as well (lying mfs) so they want a little inflation, they got a little inflation, now its time to play hide the inflation so we can start up QE4? the poor will always be with you, (thanks to the fed)

Wed, 10/29/2014 - 16:39 | 5391283 BullyBearish
BullyBearish's picture

"I love the smell of FED capitulation in the morning...smells like...VICTORY!!"

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