Investors are getting optimistic again of an earlier Fed reversal on rate hikes, but…


… systemic risks and bear-rally traps are still out there.


Risk is back “on,” and the reason is that hopes for a Fed “pivot” are also back. Traders hoping that Pivot (unlike Godot in Samuel Beckett’s play) would eventually arrive. 

The last few weeks had seen a steady abandonment of the idea that the Fed would truly pivot and make several outright interest rate cuts next year. Now, just such a hope is back. 

It’s also possible that expectations have been over-hyped thanks to the experience of the infamous “Powell Pivot” from the holiday season in December 2018. The Fed under Chair Jerome Powell had insisted that it would keep raising rates while selling off its bond portfolio on “autopilot.” The stock market staged a dramatic selloff culminating on Christmas Eve, and within days Fed governors were explicitly walking back their previous policy. 

John Authers Bloomberg 5 oktober 2022


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