Good Tuesday Morning from your Hometown Lender,

The much anticipated FOMC meeting is off to the races this morning and will end tomorrow at 11am with the Fed’s rate cut decision.

The markets will make a quick knee jerk reaction on the news, and I would anticipate that initial reaction to be to worse rates. That will account for about 25% of the day’s volatility. Chairman Powell will then take the podium around 11:30 and that is where about 75% of the volatility will happen and we will have a chance to see rates improve should Chairman Powell decide to be a dove on Fed policy. While the rate cut is certainly the top of mind for everyone (consumers included), what I am hoping to hear is more about the Fed tapering its bond sales. If we get that news, bonds can have a really good day as the supply of bonds in the marketplace will slow and demand will drive rates lower.

In the meantime…

Today we had some important data that the Fed is certainly aware of and can if they choose, to incorporate it into today’s meeting. The retail sales numbers came in somewhat stronger. The top line number was higher than expected but the core number (excluding autos) came in a bit lower than expected. Industrial production and Capacity Utilization both came in stronger than expected and seems to show that the slack in the economy is shrinking. If Capacity Utilization continues to increase, it should in theory, help increase employment (although those are not necessarily high paying jobs). To make ends meet, 36% of people have had to take on a second job.

On the day, bonds are mostly flat.

The 10-yr is at 3.65% and will likely leak a bit (as it often does) heading into tomorrows meeting. I do not recommend floating into such a big news event.

Stay safe and first make today great!