Discussion
If you study the evidence it is crystal clear that Powell is not going to be dovish tomorrow, at minimum. And if anything, with break-evens starting to move there is a good chance he will actually be hawkish - but now with equities running up into FOMC I almost guarantee you he is going to be a screeching hawk.
HY CDX isn’t even remotely confirming this late-day push higher, and now as I type VVIX is starting to move off the lows of the day. Defensives are lagging a bit, but nothing like the risk-on action typically seen when the market is about to run away to the upside.
In his CNBC interview yesterday, Roger Ferguson brought up the equity market on his own in response to a question about the bond market pricing in “higher for longer” rate policy. His comments about the equity market were bizarre - citing the wealth effect as helpful because it allows the Fed to continue hiking (WTF???) - but the fact he brought it up tells me it’s top of mind for the Fed and that they will want to address it rather forcefully via Powell’s press conference.
It’s go time.