How to Track Market Future Prices with a Simple Method
How to Track Market Future Prices with a Simple Method:
What matters is not what the Fed will do today, but what it will do in the medium term.
1️⃣ Where is the FedWatch Tool website?
When you visit the FedWatch Tool website, you'll see a long columnar table shared by everyone.
By default, 'Current' is selected on the left when you first enter. This represents the nearest interest rate decision. If you click on the 'Probabilities' tab two rows down, you'll see the table I shared in the visualization.
This table shows us the market's expectations for interest rates in upcoming Fed meetings. Looking at the visualization, if the market expects an interest rate cut from the Fed, it's on:
So, the Fed pivot expectation is: June 12, 2024.
You'll notice that no interest rate cut is expected at the March meeting, but a continuation of interest rate cuts is expected afterwards. You can also see this in the table. It's not expected to rise above the 525-550 range.
The reason for this is that core inflation (PCE and CPI) has started to decline.
2️⃣ CONCLUSION: HOW SHOULD IT BE INTERPRETED?
This data can be interpreted simply as follows: How does the market react to economic data and news?
There are many metrics we can use to see how the market reacts to data/news. The simplest one is market data on any given day. Since I don't engage in short-term investments, what's always important for me is how the market is pricing the future. That's why I follow the table I shared on important days.
Because this table shows us how the market is pricing the future, not today.
Thank you for reading 🙏
