Saturday , 16 January 2021

MBS RECAP: What’s up with the Weird Market Reaction to FOMC?

By Matthew Graham

Posted To: MBS Commentary

Today’s FOMC Announcement resulted in one of the strangest market reactions in recent memory. Explanations for the various movements abound, and most of them unfortunately contradict each other. For instance, one of the popular conclusions is that the Fed’s mention of international issues means they won’t be able to remove accommodation as quickly because the international economy is in rough shape, thus the bond market rally. Up to that point in the logic, things are fine, but then consider the massive stock market sell-off and it falls apart. More Fed accommodation should be positive for stocks. So this theory falls apart there. The next theory argued that the statement was hawkish (meaning it hearkened less accommodation than conditions might suggest). This one would explain…(read more)

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