Every StaxInvesting article tagged fomc · 4 posts.
4 articles
A market drifting higher into a jobs Friday is not calm; it is exposed. The July payrolls print is a binary event whose weight comes from what it does to the September rate decision, and a market that has rallied on a rate-path assumption is sitting on exactly what that print can confirm or overturn. This is the risk-management case for sizing down into a scheduled number you cannot handicap.
On a day the Fed holds into a war-driven oil shock, the yield curve can do something that looks contradictory: the 2-year falls while the 10- and 30-year rise. That is a bear-steepener, and it is the bond market disagreeing with itself across maturities, the front end trusting the Fed for now, the long end pricing inflation it does not trust the Fed to contain. Here is what the shape actually means.
A scheduled Fed decision you can at least prepare for. An unscheduled geopolitical shock you cannot. When the two land in the same afternoon, the risk is not additive but compounding, and the interaction is unhandicappable. This is why position size, decided in advance, is the only lever that reliably works when two binary events stack in a single window.
Most Fed meetings are near-formalities the market has already priced. Some are not. When a decision is genuinely two-sided, a real chance of a hike against a base case of a hold, landing at a scheduled 2 p.m. moment, it is an event no strategy can handicap and a stop cannot protect against. This is the case for managing size around a print you cannot predict, rather than betting on it.
