Jay Day
Been away from Substack for a bit…all the new followers have inspired me to get off my ass and put out a short note.
This is the least I have traded in a January in my 30 year career. I have been traveling and got Covid for the first time. For me, luckily, it was just like a bad cold.
IMO there hasn’t really been much to talk about! Performance wise, however, it was a profitable month. Less volatility in my p/l as I just sat back and waited to scalp and fade moves. (Love Spectra Markets Trader Handbook- I just filled out my Jan recap)
Let’s face it, it will be a slower year than 2022. The vix is currently under 20 and we await every CPI and PCE report like it’s the Superbowl.
As for the Fed today, the market is fully priced for 25 bps and a hawkish follow up by Jay - but- are they really expecting him to be that hawkish? The Nasdaq just had it’s best Jan in 20 years! My call is obviously 25 and either directly a sell risk because he is very hawkish or if the market grabs onto something dovish I would eventually fade that that move.
Last year I did some extensive reading regarding where the Fed went wrong in the 70’s and I am more firmly in the higher for longer camp. Also liked Tepper’s comment that you can’t fight 4% inflation with 4% rates! We are still a long way from 2% inflation!
The headwind for stocks is still where rates are currently. We had 13 or so years of ZERO rates and now if we have 2-5 years of 3-4.5% rates that will be a severe hinderance to the economy and to the TINA narrative. I posted an FT article on my twitter feed a few days ago that UK firms are failing at the fasted pace since the GFC. That is probably what is coming to the States as well — all the zombie companies that were kept alive on QE and zero rates will crumble — it will take time.
With this in mind longer term I am still a Bear. Short term I am just trading the narrative from day to day. Right now people predominately are grabbing ahold of the soft landing theme. Be patient- you do not need to trade everyday! Good luck at 2 pm.