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Fed Stays Put, Shows Their Math. Markets Stay Put.
RiskReversal Recap: June 18, 2025
RiskReversal Media
June 18, 2025
MARKET WRAP
As expected the Fed stayed put on rates but they did update their forecasts, lowering growth and raising inflation expectations (more on the below from Peter Boockvar). That was enough to take the air out of a a rally attempt and left equities largely unchanged on the day. Yields, which were lower into the announcement, popped a bit after, also closing unchanged. Not a ton of volatility elsewhere either as Oil also finished unchanged from yesterday.
On the day: SPX unched, QQQ unched, and IWM +0.5%. The US10YY finished unched, Oil was unched, Gold was slightly lower. The VIX did decline following the Fed announcement and into tomorrow’s holiday, finishing near 20. (down from 21)
After hours: SPY and QQQ didn’t finish great once Powell left the podium, but they are up a tick after hours.
MRKT Call: Equity strength despite a slew of negative headlines, today’s Fed Decision and future rate cut odds. De-regulation in banks and your questions including MCD.
RiskReversal Pod: Dan and Guy on the Fed presser, banks and the semiconductor space.
MRKT MATRIX: TODAY’S TOP STORIES
S&P 500 is flat as Fed signals it’s in no hurry to cut rates (CNBC)
Iran’s Leader Shows Defiance With US Weighing War Intervention (Bloomberg)
Morgan Stanley’s Wilson sees Israel-Iran causing only 5%-7% stock pullback, unless oil moves this high (CNBC)
Trump Flexes Security Powers to Keep Global Tariff Goal Alive (Bloomberg)
US Plans to Ease Capital Rule Limiting Banks’ Treasury Trades (Bloomberg)
The Biggest Companies Across America Are Cutting Their Workforces (WSJ)
Amazon chief says AI will mean fewer ‘corporate’ jobs (Financial Times)
Altman Says Meta Offered OpenAI Staffers $100 Million Bonuses (Bloomberg)
Broadcom’s 340% Rally Has Wall Street Debating If It’s Magnificent Seven Material (Bloomberg)
Bitcoin Options Show Traders Hedging Against a Dip to $100,000 (Bloomberg)
WHAT’S NEXT?
As expected, no sudden moves from the Fed on rates but there were some changes to the forecasts. From Peter Boockvar:
The 2025 GDP estimate falls to 1.4% from 1.7% and in turn their unemployment rate expectations rises one tenth from March to 4.5% vs 4.2% as of May. Headline PCE goes to 3.0% from 2.7% while the core estimate moves to 3.1% from 2.8%. I’m guessing the updated inflation guess is reflective of what they think about the tariff flow through as the 2026 forecast sees it back down to 2.4% for both headline and core.
Also of note, mostly for algos, their mean fed funds rate for this year remains at 3.9%. That implies two cuts with the current mid point of the fed funds range being 4.375%. Expectations for next year with rates is a further downshift to 3.6% which is actually 20 bps above the median given in March. Their longer run view remains at 3% which implies a REAL rate of 1% if they achieve sustainably a 2% inflation rate.
Interestingly, the median dots for two cuts this year is quite split in that 7 people don’t expect any cuts this year while two see one, 7 expect two and one sees 3.
So while the rate decision was widely expected, expiration week dynamics may have kept us from seeing more of a reaction in equities to the updated (slightly stagflationary) forecast. As we’ve noted recently, this week features a very large expiration in and around SPX 6000 that’s helping to dampen equity moves. That backdrop is exacerbated by tomorrow’s holiday. Most of that effect disappears into next week, perhaps freeing equities up for a bit more movement and possibly their next leg higher or lower.
Thursday
Juneteenth Holiday
Friday
8:30am - Philly Manufacturing
Pre-market: KMX 8.5%, KR 3.6%
TODAY’S EPISODES
Watch MRKT Call’s newest episode: All Eyes on Fed Chair Powell
Equity strength despite a slew of negative headlines, today’s Fed Decision and future rate cut odds. De-regulation in banks and your questions including MCD. |
Analysis: SPX, US10YY, BTC, DXY, C, MSFT, AVGO, MRVL, CRWV, Crude, MCD, FCX, SLV, GLD
Your Questions:
THE GREAT McGONICAL : Give us the low down on the Silver breakout play(s) vs staying with GOLD.
Chris L: Any chart thoughts on MCD? I like this level to try a long. You could almost say…I’m lovin it
Carter Evans: Guy why do you like FCX?
Learn more about our sponsor, CME Group.
Watch RiskReversal Podcast’s newest episode: All Eyes on Fed Chair Powell
Dan and Guy preview the FOMC, discuss key developments on bank de-regulation and rising stock prices in the semi-space. |
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