Good morning on this best day of the week, Wednesday, from your Hometown Lender,

This is a slow week for economic data, which is a blessing as there is more than enough potential volatility from today’s Fed announcement.

I do not see any chance the Fed will cut today, and the likeliest outcome is the Fed holds off setting rate cut expectations for June, citing unclear paths of inflation and employment. Markets are expecting the Fed pause to continue, which is why we have seen some consolidation since last Friday’s jobs report. Maybe the Fed throws us a bone discussing the economic slowdown, and maybe they also comment as Dr. Elliott Eisenberg shared that ”April net job growth came in solid at 177,000. Critically, monthly job numbers are for the pay period including the 12th and thus are for early April, at most two weeks after “Liberation Day.” They tell us nothing — good or bad–– about tariff impacts. However, the labor market continues cooling. Average annual hourly earnings continued to weaken, and at 3.77%, are the second lowest since COVID, and Feb/March employment was revised down.” If the Fed throws us a bone, rates will improve quickly even without a cut.

I know there has been a lot of chatter about property values deflating. Prices, of course, can’t continue to go up in all areas all the time, but if you want to know one of my favorite metrics for growth predictions, the graph below tells the story.

Follow the people.

Here is a good recap from Bloomberg on the state of the markets…

It’s decision day at the Fed and all eyes are on what it will mean for stock and bond markets. With the Fed widely expected to hold its benchmark rate steady at 4.25%-4.50%, traders will be pouring over Jerome Powell’s comments for clues on whether President Donald Trump’s policies are prompting any change in the outlook for further rate cuts. Expectations for lower rates have been faded as of late because of the strong US economy, particularly the last jobs report. Money markets currently price three quarter-point reductions this year, one less than at the start of April. “The meeting will likely shape expectations more than usual as it is the first decision after the reciprocal tariff announcement,” said Erik Liem, a rates strategist at Commerzbank. “Verbal guidance will be key, as markets have postponed expectations” for monetary easing, he said.

But with economic growth expected to slow and US tariffs still in the cards and earnings season still underway, there are a lot of wildcards at play. In equities, options markets expect a one-day move of 1.1% for the S&P 500 Index after the meeting, according to data from Goldman Sachs. “Hawkish surprises could lead to a temporary decline in cyclical assets,” said Florian Ielpo, head of macro research at Lombard Odier. “A dovish surprise looks extremely unlikely.”

Short-term Treasury yields are vulnerable given that the Fed in March had forecast two rate reductions this year, according to Kevin Flanagan, head of fixed income strategy at Wisdom Tree. 

“Unless something bad happens between now and June, it means the Fed doesn’t need to go,” he said.

Stay safe and make today great!

Stay safe and make today great!