50 Shades of 25 - Addendum

Happy Ending, but there's One...More..."What If"....and it's a biggie!!

My grandmother used to say: “There is no such thing as a hawkish 50bps rate cut”.

Only in the land of the Monkeys called Wall Street such an oxymoron exists.

Lets throw in a Meme to make this clear:

Yes, in the past the Market dropped a few times after the first rate cut but that wasn’t because of the rate cut itself - it was because there was a Recession. The chart below makes this point clear (source: Goldman):

• Equities go up after the first rate cut when there’s no Recession!

I mean, it’s such an obvious point but Wall Street Monkeys have no idea what “Causality” is. This is even simpler than the Chicken and Egg debate. Recessions didn’t happen BECAUSE of the 50bps rate cut! A more sensible question to be asking is whether we are going into a Recession or not. But that’s not for today.

For now, we pity those who got carried away by Wall Street…

In our case, we rejoice because our playbook is coming to fruition. With that I mean the “What If”…it’s Time” Playbook that we further expanded upon in “50 shades of 25”. And we had mentally prepared for a proper Fed Pivot in a more detailed “What If” piece with our buddy Eliant.

Yesterday with all the noise going around in Wall Street, we chose to do nothing. Instead we ended up watching CNBC and Bloomberg TV so you don’t have to. Every talking head was pitching BUY BONDS BUY BONDS BUY BONDS. Bonds ended up being the worst performing asset on the day.

Our playbook is the complete opposite: