{"id":66556,"date":"2025-09-16T00:49:16","date_gmt":"2025-09-16T00:49:16","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/66556\/"},"modified":"2025-09-16T00:49:16","modified_gmt":"2025-09-16T00:49:16","slug":"three-indicators-that-matter-for-this-weeks-fed-meeting","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/66556\/","title":{"rendered":"Three Indicators That Matter For This Week’s Fed Meeting"},"content":{"rendered":"

\"Three<\/a><\/p>\n

\u201cThe gaze must be broad and far reaching.\u201d <\/strong>\u2014 Miyamoto Musashi<\/p>\n

In markets, as in strategy, perspective determines victory.<\/p>\n

While Wall Street fixates on Wednesday’s Fed meeting with tunnel vision, we maintain Musashi’s broad gaze across multiple data points and time horizons.<\/p>\n

So what actually matters right now? The two-year Treasury yield.<\/strong><\/p>\n

Currently trading at 3.53%, this level carries historical significance.<\/p>\n

\"Three<\/a><\/p>\n

It’s sitting “right where it stopped going down into the 50 basis point rate cut of September of last year,” Hedgeye CEO\u00a0Keith McCullough<\/strong><\/a> noted on Monday’s edition of The Macro Show.\u00a0<\/p>\n

Like fractals repeating across scales, this pattern has emerged before.<\/p>\n

The two-year is the most sensitive part of the yield curve to Fed policy\u2014when traders expect more cuts, they buy two-year notes, pushing yields down.<\/p>\n

When those rate cut expectations start to fade, the two-year yield rises.<\/p>\n

The Crowded Consensus<\/strong><\/p>\n

\"Three<\/a><\/p>\n

With consensus strongly favoring multiple rate cuts, the two-year yield becomes our contrarian indicator.\u00a0<\/p>\n

As McCullough explained Monday on The Macro Show, “Polymarket is a better place to bet on the probability of [rate cuts] than betting on bonds.”<\/p>\n

Polymarket offers clean, binary bets on specific Fed decisions, while bonds price in many factors like inflation expectations, term premiums, future rate paths, and more.<\/p>\n

That makes bonds messier for pure rate cut bets, but more revealing about what’s actually happening beneath the surface.<\/p>\n

When considering the rate cuts left on the table for 2025, both futures and prediction markets are aligned for multiple cuts:<\/p>\n\n\n<\/td>\n<\/tr>\n

Note the difference: Polymarket is leaning more conservative than futures traders through year-end.<\/strong><\/p>\n

This divergence matters. Futures traders are extrapolating a straight line from weak labor data into three consecutive cuts. Polymarket traders, while still cut-heavy, are a shade more skeptical.<\/p>\n

As McCullough put it: \u201cAll people are doing is extrapolating the past as the future\u2014they\u2019re saying we get the rate cut because the labor data is terrible and Trump is telling [the Fed] to go really big.\u201d<\/p>\n

The stagflation seen in #Quad3 labor slowing has been obvious\u2014already priced into the weakening dollar and suppressed two-year yield.<\/p>\n

But with the USA Quad Count of 3-2-1 (Q3 #Quad3, Q4 #Quad2, Q1 2026 #Quad1), what happens when growth and inflation re-accelerate in Q4’s #Quad2?<\/p>\n

\"Three<\/a><\/p>\n

Market Structure at Extremes<\/p>\n

The options market reveals extreme positioning ahead of the Fed.<\/p>\n

Market makers are long gamma creating mechanical volatility suppression.<\/p>\n

Think of it like shock absorbers on a car\u2014when dealers are long gamma, they trade against price moves, smoothing out the market’s bumps.<\/p>\n

But the real extreme is in systematic positioning. Vol-control funds and CTAs are near five-year highs<\/strong> in equity exposure.\u00a0<\/p>\n

\"Three<\/a><\/p>\n

These systematic strategies have to deleverage when volatility rises. With positioning this extreme, they’ve become sellers waiting for a trigger.<\/p>\n

Bottom Line<\/p>\n

We’re not in the business of making calls. We execute on process.<\/p>\n

For daily Macro analysis subscribe to The Macro Show<\/strong><\/a>, and see our tactical Asset Allocation updates in\u00a0ETF Pro Plus<\/strong><\/a>.\u00a0<\/p>\n

\"Three<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"\u201cThe gaze must be broad and far reaching.\u201d \u2014 Miyamoto Musashi In markets, as in strategy, perspective determines…\n","protected":false},"author":2,"featured_media":66557,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[175],"tags":[989,79,46670,18,629,30816,46668,19,17,188,4194,30319,6103,46669,39892,10921,21757],"class_list":{"0":"post-66556","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-bonds","9":"tag-business","10":"tag-consensus","11":"tag-eire","12":"tag-fed","13":"tag-fomc","14":"tag-hedgeye","15":"tag-ie","16":"tag-ireland","17":"tag-markets","18":"tag-meeting","19":"tag-rate-cuts","20":"tag-rates","21":"tag-treasuries","22":"tag-treasury","23":"tag-volatility","24":"tag-yield"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/66556","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=66556"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/66556\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/66557"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=66556"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=66556"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=66556"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}