An article by Elwyn Chan of Stirling Fort Capital.
The recent global markets selloff was triggered by increased uncertainties surrounding Fed’s policy stance. There have been conflicting viewpoints among Fed officials whether a rate hike is necessary in the upcoming FOMC meeting on 20-21 September. Each time a Fed official speaks, the probability of rate hike in the coming meetings fluctuated drastically, resulting in wild market swings.
As the Fed enters the “blackout period” ahead of its September meeting, we enjoy some respite from the Fed’s talking heads. We highlight the latest viewpoints of all voting members of the US Fed and their position in the dove/hawk camp.
The doves are appearing less dovish where even dove leader Yellen stating “the case for an increase in the federal funds rate has strengthened in recent months.” Also, Fed Vice Chair Fischer is firmly in the hawkish camp and claim that Yellen’s Jackson Hole speech was “consistent” with a possible rate hike in September and two rate hike this year.
Ominously, the US 10 year yield has risen to a recent high of 1.75%, clearly breaking out of its downward one-year trend line. Therefore, a rate hike in the September Fed meeting remains a “live” possibility with the Fed funds futures pricing in a 20% possibility of a rate hike. This will be a tail risk to the financial markets if Fed chose to hike interest rate.
1-year chart of US 10-year Government Bond Yield
Source: Bloomberg
Fed funds futures implied possibility of a Fed rate hike to 0.5-0.75%
Source: Bloomberg
The Dove Camp
Below are the Fed doves and their recent comments reflected a less dovish stance.
The Hawk Camp Below are the Fed hawks and their recent comments emphasized their hawkishness.
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Best regards
Elwyn Chan, CAIA
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CEO, Stirling Fort Capital Pte Ltd
391A Orchard Road #08-07 Ngee Ann City Tower A S238873
(A Registered Fund Management Company with MAS)
– Director, Stirling Fort ASEAN Real Estate Fund I SPC
– Director, Catalyst Stirling Fort Pharma Fund SPC
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