A Tough One For the Fed

From last Friday's note:

"...this is the environment where a hike actually could lead to lower 10 and 30-year yields... If that's the case the Fed may be comfortable hiking next week, which may have me sympathizing with the consensus after all... Although there's still the mid-term election and federal debt issues I mentioned yesterday for the Fed to contend with."

Suffice to say that a hike is what's needed to bring down longer-term rates has become the consensus view... But only if it's followed by a statement and/or press conference that implies there'll be zero hesitation to hike again should conditions dictate... I.e., the language has to be sufficiently hawkish.

Keep in mind that I'm expressing the consensus view above, we'll see tomorrow.

This has to be a tough one for the Fed... Aside from the political pressure -- direct as well as the timing relative to mid-terms -- they'll in-effect be tightening the economic purse strings they control amid an energy supply shock... I.e., folks -- particularly those who live paycheck to paycheck -- are struggling enough just to fill their gas tanks and their grocery carts... And, frankly, the Fed simply cant print oil nor oats!  

Thing is, contrary to the sentiment until recently, a Fed rate hike was the last thing the market was hankering for... And I firmly believe it was the last thing the newly appointed Fed chair intended to see happen... Now the market appears to be all but demanding it... Hmmmm

So you might be wondering, if the market is demanding it, and it looks like the Fed will deliver it (although, if there were ever a time when the Fed might balk at market "forces" it's now), why are stocks having a rough go if it to start the week?

Well, that's likely more about the Iran situation... Trading yesterday was yoyo-ing along with social media posts suggesting Iran is "desperate for a deal," which they in short-order denied... Regardless, it, and other recent developments, suggest a willingness to get back to the table.

We'll be getting deeper into these weeds herein this weekend when I return from vacation.

In the meantime, suffice to say that palpable uncertainty during the historically worst month of the year for equities is the makings of, at a minimum, very choppy action.

Stay tuned...