First Fed meeting under Kevin Warsh. Rates almost certainly not moving. But what he says and how he says it is what markets are actually waiting for.
S&P 500 Futures Are Positive but Quiet
S&P 500 futures gained 0.3% early Wednesday morning. Nasdaq futures up 0.5%. Dow futures added 41 points. Calm moves. Nobody is making big bets before the Fed speaks.
That is pretty normal for a Fed decision day. Traders tend to sit on their hands until the statement drops and the press conference starts. Position sizes get smaller. Volume gets lighter. Everyone waits.
For S&P 500 futures rate decision itself is not the suspense. Markets are pricing in no change to the current 3.5% to 3.75% range with very high confidence. The real event is what comes after. The statement language. The press conference. And whatever Kevin Warsh decides to say or not say in front of cameras for the first time as Fed chair.
Kevin Warsh Takes Over at an Interesting Moment
This is the first FOMC meeting led by Warsh who took the chair position less than a month ago. New face at the top of the most watched central bank in the world. Markets are paying close attention to tone and body language as much as actual policy.
Warsh has a reputation for being skeptical of how much central banks communicate. He said publicly last year that his approach is more thinking and less talking. That philosophy is about to get its first real test in a live setting with markets hanging on every word.
What traders want to know is simple. Is the Fed done raising rates or not. Is a cut coming at some point this year or not. Warsh probably will not answer those questions directly. How he avoids answering them will tell people a lot.
Dot Plot Could Be Missing Something
One of the more interesting things to watch Wednesday is the dot plot. That is the Fed’s chart showing where each policymaker expects interest rates to go over the coming years. Traders study it closely after every meeting for clues about future borrowing costs.
There is speculation that Warsh may not contribute his own dot to the chart. He has been critical of the dot plot format in the past and sees it as creating unnecessary noise. If his dot is missing that itself becomes a talking point and a signal about how he plans to run things differently from his predecessor.
In central bank world what is absent from communication can matter just as much as what is present.
Tuesday Had a Split Market
Before Wednesday’s Fed meeting Tuesday’s session showed something interesting happening inside the market.
Dow Jones gained nearly 330 points or 0.6%. Crossed 52,000 for the first time ever intraday and closed at a record. Old economy and value stocks did well.
Tech was a different story. S&P 500 slipped 0.6%. Nasdaq fell 1.2%. Growth stocks and high valuation names gave back some ground. Rotation was happening in real time. Money moving from tech into other parts of the market.
SpaceX was the exception to the tech weakness. Shares gained another 4% Tuesday and pushed even higher after the close. Stock is now up nearly 50% from its $135 IPO price in less than a week of trading. Still doing things that normal valuation frameworks struggle to explain.
What Actually Matters After the Decision
No rate change Wednesday is the baseline. Everything after that is what sets the tone for the next few weeks.
If Warsh sounds cautious and signals rates are staying higher for longer that is a headwind for tech and growth stocks. If he sounds more relaxed about inflation and hints the tightening cycle is over that is fuel for another leg higher across risk assets.
Peace deal signing in Switzerland is still scheduled for Friday. Fed decision lands today. Two big events in three days. By end of this week markets will have a lot more clarity on both the geopolitical and the monetary policy picture than they do right now. That combination could set up some meaningful moves in either direction depending on how both things land.