“Don’t Fight The Fed” is a popular mantra Wall Street traders are passing around to each other throughout the last few months. If you look at a chart of the overall stock market, you can see where the Fed started to pivot and get more hawkish in November 2021.
But, legendary bond analyst David Rosenberg believes that the Fed’s hawkish cycle ends tomorrow. The Fed will release its Federal Fund Rates at 2 pm Wednesday. Street estimates are for a .75% rate hike. Rosenberg said on Twitter on Tuesday that the Federal Reserve will abandon forward guidance and rate commitments and instead rely on data.
“Watch the Fed abandon guidance and rate commitments and embrace data dependency,” Rosenberg said on Twitter. “This cycle of hikes ends at 2pm tomorrow. Buy bonds.”
Watch the Fed abandon forward guidance and rate commitments and embrace data-dependency. This cycle of hikes ends at 2 pm tomorrow. Buy bonds.#RosenbergResearch
— David Rosenberg (@EconguyRosie) July 26, 2022
When Rosenberg refers to “data-dependency” he is most likely referring to the fact that there is data currently showing inflation could be slowing down (gas prices falling, Walmart slashing apparel prices), and the Fed will be in a position to monitor data in real-time and make decisions about the Federal Funds rate.
While Rosenberg tells his followers to buy bonds, the Fed reversing its stance on future rate hikes would likely be good news for stocks as well.
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Who Is David Rosenberg?
Rosenberg is the former Chief North American economist at Merrill Lynch in New York, as well as the Chief Economist & Strategist at Gluskin Sheff + Associates. Currently, Rosenberg runs his own firm, Rosenberg Research & Associates.
Photo: Courtesy Rafael Saldana on Flickr