FOMC's Steady Rates

🙌 The FOMC maintained interest rates in their current range of 5.25-5.5%. March 21, 2024 | Peel #672 Silver Banana goes to... [SRS Acquiom. ](=) In this issue of the Peel: - 🙌 The FOMC maintained interest rates in their current range of 5.25-5.5%. - 🌯 Chipotle just announced a 50 to 1 stock split, their first one ever. - 📈 What comes up must come down… BTC’s been experiencing volatility. Market Snapshot 📸 = Banana Bits 🍌 - The best chart related to yesterday’s FOMC meeting [we could find]() - Reddit’s IPO has been priced, fired up, and ready to roll for its debut later today. Google “[RDDT stock](=)” to find it - Micron kept the AI boom rolling with [their Q4 earnings]( - Julian Assange’s life on the lamb could be coming [close to an end]( Due Diligence Trends: Data You Can Bank On What do 150 senior executives at U.S. investment banks with up to $1 billion in AUM know about due diligence? Shocker: quite a bit. That’s why SRS Acquiom and Mergermarket teamed up to talk with them about it. The survey covered both buy-side and sell-side, and included the bulge bracket, the boutique, and those firms in between. They had plenty to say, especially given how important it is to stay ahead of the curve in an M&A market like this one. A few spoilers: Is due diligence taking longer? Yep. Is regulatory scrutiny rising? Sure is. The point is, there’s a whole lot of intel to be absorbed (and applied), and it’s all in the new SRS Acquiom M&A Due Diligence Study. [Download it while it’s hot.]() Macro Monkey Says 🐒 JPow Speaks I pledge allegiance to Jerome of the Powell States of America… The man, myth, and legend that is our fearless leader, Jerome Powell, finally spit some macro game yesterday. And, if you didn’t know better, you’d think money printer Powell is back in action. Even higher inflation and weaker employment (the exact two things the Fed is meant to eliminate) couldn’t stop this man. Now, is it sad that the highlight of my week is a 71-year-old, unelected official talking for an hour and a half about not doing anything sad? Probably. But let’s get into it. What Happened? The real 2024 Super Bowl finally happened, and guess what? We’re all winners. [Source](=) Yesterday, the Federal Reserve’s policy-setting arm, the Federal Open Market Committee (FOMC), wrapped up their highly-anticipated, two-day meeting to decide our economic fortunes for the next 6 weeks. The FOMC maintained interest rates in their current range of 5.25-5.5%, making no cuts or hikes, and sent the S&P 500 to close at an all-time high of 5,224.62. Not only were rates held steady, but this meeting and the accompanying Fed statement had the least amount of meeting-to-meeting changes that I’ve ever seen. Per the WSJ’s Fed Statement Tracker, we can see that exactly 6 words were removed and two added: [Source](=) If it ain’t broke, don’t fix it. That age-old saying just about sums up the Fed’s view of the current state of the economy. But this was a special meeting as it came alongside the Fed’s updated Summary of Economic Projections (SEP). One particular projection, the (in)famous “dot plot,” stole the show and actually sent even my portfolio higher for the day (for once). The Numbers The FOMC is projecting a triple-double from the U.S. economy in 2024 and beyond, effectively. For starters, GDP growth expectations for 2024 moved much higher compared to what officials were expecting at the end of 2023. [Source]( Here, we can see that most FOMC participants went from expecting 2024 GDP growth in the range of 1.2%-1.7% to now expecting a range of 2.0%-2.5%. While influenced by other factors, this is hella optimistic for 2024 earnings growth as well. However, employment expectations changed far less than those of GDP growth. But, like overall economic growth, the outlook here only drove further optimism: [Source](=) But, the real reason markets hit an all-time high can be found in another chart of updated projections from the dorks at the Fed. The (in)famous “dot plot” is the Malcolm-Butler-Goal-Line-Interception of the SEP, as this, at the end of the day, is kind of the only thing that matters in the market’s view. And this is what it looks like: [Source]( Each dot represents an FOMC participant's guesstimate as to where rates will sit at the end of each indicated year. So, we can see that the majority of participants expect 2024 to close in the 4.5%-4.75% range, implying three 25bp cuts this year. That’s very similar to what had been projected in December, but two things were significantly different this time around: - First, the range got narrower, with no participants expecting rates below 4.25% - Second, we’ve seen upticks in inflation and weaker-than-expected employment numbers in the interim period. And this is what we mean when we say “fearless.” Fed watchers grew concerned in recent weeks that surprisingly elevated prints in the CPI and PCE reports for both January and February would dissuade the Fed from its goal of three cuts this year. However, JPow stood on business, largely due to the expectations for increased GDP growth and overall activity, implying that further cuts won’t be needed to hit 2% inflation while keeping employment strong. The Words We call it “JPow Speaks” for a reason. Because, as important as the quantitative data is, hedge funds have been built on the goddamn tone of a Fed Chair’s voice at a Press Conference, let alone the words he/she actually says. So yes, the utterances of Powell and his predecessors matter a lot. Some of the most informative quotes from yesterday’s Super Bowl—I mean—*Fed Meeting, include: “We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year…. we are prepared to maintain the current target range for the federal funds rate for longer if appropriate.” “We don’t really know if this is a bump on the road or something more. We’ll have to find out… we’re not going to overreact… to these two months of data, nor are we going to ignore them.” [on recent upticks in inflation]“... haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%.” [on slower hiring]... “could also be a reason for us to begin the process of reducing rates.” The Takeaway? The classic Fedspeak aside, effectively, what the Fed is saying between the above quotes and numbers is that: - Rates have hit their peak, and we still expect the equivalent of three 25bp cuts this year despite recent sub-optimal data - We expect 2024 to be a stronger year economically than previously. GDP growth, employment, and inflation are all expected to be better, meaning there won’t be a need for further or faster rate cuts - We know this sub-optimal data is going to emerge. And, we’re not gonna let it shake us… unless it gets really bad… or continues for a long time. What's Ripe 🤩 Mobileye (MBLY) 📈7.5% - Crushing a few road sodas very well could make a return as another great American pastime, especially if you’re driving a Volkswagen. - The German automaker blessed Mobileye with a new contract to expand the usage of the autonomous vehicle maker’s software in VW cars. - Long-term, VW still wants to make their own, but Mobileye—and Intel, which owns 88% of the firm—will take the win for now. Chipotle Mexican Grill (CMG) 📈3.5% - Everybody’s out here mucking guac for a few bucks extra as Chipotle shares just hit an all-time high. Sure, the FOMC helped too, but… - Chipotle announced on Tuesday plans for a 50-to-1 stock split, one of the biggest in NYSE history and Chipotle’s first-ever split. - With shares closing at $2.895k yesterday, this means a holder of one share at that price today will get 50 shares at $57.90 following the split. What's Rotten 🤮 Signet Jewelers (SIG) 📉12.1% - Diamonds might be a girl’s best friend, but losses are an ape’s worst enemy. Signet Jewelers was checking off of those both boxes yesterday. - The jewelry maker reported EPS of $6.73/sh on $2.5bn, beating the bottom line but missing revenue estimates of $2.55bn. - The company also boosted dividends by 26%, but guidance was below Street estimates on weak demand for diamonds and, presumably, love. BioNTech (BNTX) 📉4.4% - I think I’m gonna be sick—and it’s too bad BioNTech doesn’t have any medicine for me. At least, that’s how it seems, given their 66% drop in revenue. - The C-19 hero, alongside Pfizer, saw their joint vaccine sales continue to plummet, which has hurt both Pfizer and Moderna as well. - From having one product sell in the tens of billions just 1-2 years ago, total revenue now sits at just €3.8bn. Thought Banana 🤔 Don’t Fight The Flows On this beautiful post-FOMC-meeting holiday, we figured it was time to take the popular macro saying of “don’t fight the Fed” and apply it to a much more important investment institution—digital assets. Since spot BTC ETFs launched in mid-January, the flow show has been nothing short of a blowout. But, last week, we finally found a chink in BTC’s armor. What Happened? Diamonds, paper, and everything in between—since “going public” with the spot ETF launches, the hands of BTC holders have become a mixed bag. [Source](=) Two days ago, we saw the single highest amount of outflows from spot BTC ETFs that we’ve seen thus far. Still, more than $11.67bn in net inflows have set records for ETF launch popularity. But with BTC’s recent fall, the paper holders are starting to show their hands. According to Jim Bianco, whom I stole the above chart from, the average BTC purchase price of those $11.57bn in inflows is $57.5k. If we exclude GBTC and their associated premium, the average cost sits at $55.1k. So… if BTC prices fall below those levels, as Bianco points out, this will be a serious test of the strength of newly recent holders. Now, with that in mind, BTC still has next month’s halvening to look forward to. As a reminder, the “halvening” refers to the BTC halving event schedule to occur in April. This is when supply creation will fall and, if history repeats or rhymes, could result in another dramatic move higher in BTC price. [Source]() The Takeaway? This is likely one of those Twitter stories that’s hotter than Paul Atreides on Arrakis for a day or two, but we’d be surprised if it mattered in the long-term. BTC holders are used to ridiculous, unspeakable volatility that would’ve killed everyone on the Mayflower. Although, the noobs to the space buying spot ETFs are in unchartered waters. The test then becomes a balancing act between old-school, long-term holders and TradFi investors who are getting exposure to the BTC market. As always, we’ll see! 💭 The Big Question 💭: How will TradFi investors deal with the volatility of BTC in the long term? Can the enormous liquidity added by ETF issuers bring some stability to prices in the market? Banana Brain Teaser 💡 Previous 🗓 125% of 5 equals what? Answer: 6.25 Today 🕐 During a recent storm, 9 neighborhoods experienced power failures of durations 34, 29, 27, 46, 18, 25, 12, 35, and 16 minutes, respectively. For these 9 neighborhoods, what was the median duration, in minutes, of the power failures? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “Don’t fight the Fed” — Marty Zweig How Would You Rate Today's Peel? 😁 [All the bananas]() 😐 [Meh]() 😩 [Rotten AF](=) Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]() // [WSO ALPHA](=) // [ACADEMY]( // [COURSES]( // [LEGAL]( [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353