{"id":230787,"date":"2025-09-18T13:04:49","date_gmt":"2025-09-18T17:04:49","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=230787"},"modified":"2025-09-19T03:56:08","modified_gmt":"2025-09-19T07:56:08","slug":"goldilocks-sparks-a-world-party","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/goldilocks-sparks-a-world-party\/","title":{"rendered":"Goldilocks Sparks a World Party"},"content":{"rendered":"\n<p>It\u2019s time for another musical reference, this time more obscure than usual.&nbsp; I was hoping to utilize the title of the 1990 album \u201c<a href=\"https:\/\/www.bing.com\/ck\/a?!&amp;&amp;p=3541784b3218172d40a37111516947db6a52b19a865a6570a89e467245bd4db2JmltdHM9MTc1ODE1MzYwMA&amp;ptn=3&amp;ver=2&amp;hsh=4&amp;fclid=396fb4cb-d070-6bc1-3e1a-a19ad1c06ae6&amp;psq=world+party+goodbye+jumbo&amp;u=a1aHR0cHM6Ly9lbi53aWtpcGVkaWEub3JnL3dpa2kvR29vZGJ5ZV9KdW1ibw\">Goodbye Jumbo<\/a>\u201d, but <a href=\"https:\/\/www.bloomberg.com\/opinion\/newsletters\/2025-09-18\/fomc-the-dog-that-didn-t-bark-holds-a-clue-to-the-fed-s-rate-path?srnd=undefined&amp;sref=UQoV8r0O\">John Authers\u2019 column for Bloomberg<\/a> beat me to the punch.&nbsp; We of course learned yesterday that the FOMC opted for a 25-basis point cut despite the faint expectations for something larger.&nbsp; For a few minutes during Powell\u2019s press conference yesterday, that album\u2019s minor hit \u201c<a href=\"https:\/\/youtu.be\/ZZrIdbumFiI?si=6c6Xc-BtBJSLqEQ5\">Way Down Now<\/a>\u201d seemed to apply, but as I begin typing this morning, the recording artist\u2019s name, <a href=\"https:\/\/www.bing.com\/ck\/a?!&amp;&amp;p=a9761145f07305eff0406a2077824cd4fc5c23f621b5a3261dbf1a99db12174bJmltdHM9MTc1ODE1MzYwMA&amp;ptn=3&amp;ver=2&amp;hsh=4&amp;fclid=396fb4cb-d070-6bc1-3e1a-a19ad1c06ae6&amp;psq=world+party+&amp;u=a1aHR0cHM6Ly9lbi53aWtpcGVkaWEub3JnL3dpa2kvV29ybGRfUGFydHk\">World Party<\/a>, was much more appropriate.<\/p>\n\n\n\n<p>Although Chair Powell is clearly a lame duck, with his term expiring in May, his comments during his press conference were indeed quite deft.&nbsp; Despite acknowledging that the Fed was indeed cutting rates amidst rising prices, he was generally able to portray yesterday\u2019s FOMC decision as a \u201crisk management cut.\u201d&nbsp; His opening speech <a href=\"https:\/\/www.federalreserve.gov\/mediacenter\/files\/FOMCpresconf20250917.pdf\">contained the phrase<\/a>, \u201ci<em>t is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed,\u201d<\/em> but it was quite clear that the more pressing risk was deemed to be that of a weaker labor market rather than higher prices.&nbsp;<\/p>\n\n\n\n<p>This was apparent in the <a href=\"https:\/\/www.federalreserve.gov\/newsevents\/pressreleases\/monetary20250917a.htm\">FOMC Statement<\/a>, which omitted the line \u201cthe committee judges that the risks to achieving its employment and inflation goals are roughly in balance\u201d.&nbsp; If the risks are no longer in balance, then one must have increased relative to the other.&nbsp; It was reiterated just seconds after Powell approached the podium, <a href=\"https:\/\/www.federalreserve.gov\/mediacenter\/files\/FOMCpresconf20250917.pdf\">when he said<\/a>:<\/p>\n\n\n\n<p><em>While the unemployment rate remains low, it has edged up, job gains have slowed, and downside risks to employment have risen. At the same time, inflation has risen recently and remains somewhat elevated. In support of our goals, and in light of the shift in the balance of risks, today the Federal Open Market Committee decided to lower our policy interest rate by 1\/4 percentage point. We also decided to continue to reduce our securities holdings.<\/em><\/p>\n\n\n\n<p>The consensus was remarkably tight, with only one dissent.&nbsp; That the newly appointed governor, Stephen Miran, was the only dissenter was hardly a surprise.&nbsp; It was widely assumed that he was going to advocate for a larger cut, and he did.&nbsp; But <a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/all-eyes-on-the-fomc\/\">as we noted yesterday<\/a>, the \u201c<a href=\"https:\/\/forecasttrader.interactivebrokers.com\/eventtrader\/#\/market-details?id=806285268%7C20251029%7C2&amp;detail=contract_details\">Number of Dissenting FOMC Members<\/a>\u201d contract on IBKR ForecastTrader had only a 33% \u201cyes\u201d for one dissenter, while 43% expected two or more.&nbsp; Based on prior public statements from various voting members of the FOMC, it seemed reasonable to expect that at least one would advocate either for a more aggressive cut or even none.&nbsp; Instead, the pre-existing members all fell into line.&nbsp;<\/p>\n\n\n\n<p>One place where there was a wider range of opinions was in the <a href=\"https:\/\/www.newyorkfed.org\/medialibrary\/media\/markets\/fomc-economicprojections-20250917.pdf?sc_lang=en\">Summary of Economic Projections<\/a>, or \u201cdot plot\u201d.&nbsp; There were wide spreads in the projections for future cuts, but the market enjoyed the idea that the median projection for the remainder of 2025 was for two more cuts.&nbsp; That ratified the market\u2019s expectations, so traders of course took heart from that.<\/p>\n\n\n\n<p><strong><em>Federal Reserve \u201cDot Plot\u201d for September 2025\u00a0<\/em><\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"574\" height=\"482\" data-src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/09\/image-43.png\" alt=\"\" class=\"wp-image-230788 lazyload\" data-srcset=\"https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/09\/image-43.png 574w, https:\/\/ibkrcampus.com\/campus\/wp-content\/uploads\/sites\/2\/2025\/09\/image-43-300x252.png 300w\" data-sizes=\"(max-width: 574px) 100vw, 574px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 574px; aspect-ratio: 574\/482;\" \/><\/figure>\n\n\n\n<p><em>Source: <\/em><a href=\"https:\/\/www.newyorkfed.org\/medialibrary\/media\/markets\/fomc-economicprojections-20250917.pdf?sc_lang=en\"><em>Federal Reserve<\/em><\/a><em><\/em><\/p>\n\n\n\n<p>Of course, as the Chair reminded us, a median means that half the readings are above that level.&nbsp; In this case, 9 dots are clustered on the 3.625% median and only one data point is below that.&nbsp; Although the dots are anonymous, it seems quite obvious that the low reading belongs to Dr. Miran.&nbsp; Meanwhile, 9 dots are above that level, with 6 projecting that rates will be unchanged from the new 4.125% target, two projecting a single cut, and one projecting a reversion to the prior 4.375% level.&nbsp; Furthermore, the median for 2026 is 3.375%, which would imply only one further cut next year.&nbsp; That is well above the market\u2019s expectation for rates around the 3% level.&nbsp; The bias is clearly toward further rate cuts, but the market might once again be more optimistic about their prospects for their arrival.<\/p>\n\n\n\n<p>Once again, though some familiar patterns played out in the market\u2019s post-FOMC reaction.&nbsp; First, the market hears what it wants.&nbsp; The Chair reiterated the risks to inflation, but once he declared them to be secondary, the market was glad to hear it.&nbsp; Second, the \u201chalf-life\u201d of dips continues to shrink.&nbsp; We did have a few somewhat rocky moments yesterday afternoon, but buyers quickly emerged to buy the dip \u2013 as usual.&nbsp; Third, good news in the tech sector is a reliable source of lift, with today\u2019s news of <a href=\"https:\/\/www.bing.com\/ck\/a?!&amp;&amp;p=e7f925efea12ac948347174f618d228416c0725faacbf6cc51cf7b251cfe0857JmltdHM9MTc1ODE1MzYwMA&amp;ptn=3&amp;ver=2&amp;hsh=4&amp;fclid=396fb4cb-d070-6bc1-3e1a-a19ad1c06ae6&amp;psq=nvda+intl&amp;u=a1aHR0cHM6Ly9udmlkaWFuZXdzLm52aWRpYS5jb20vbmV3cy9udmlkaWEtYW5kLWludGVsLXRvLWRldmVsb3AtYWktaW5mcmFzdHJ1Y3R1cmUtYW5kLXBlcnNvbmFsLWNvbXB1dGluZy1wcm9kdWN0cw\">Nvidia\u2019s (NVDA) stake in Intel<\/a> (INTC) proving to be today\u2019s catalyst.<\/p>\n\n\n\n<p>This brings us around to this morning\u2019s theme music.&nbsp; The group World Party was at best a modest success in the US and UK.&nbsp; Hopefully their biggest hit, \u201c<a href=\"https:\/\/youtu.be\/B2nCugGQZO0?si=Y5Erp-rDeAp0ZvBa\">Ship of Fools<\/a>\u201d, with the refrain, \u201cI don\u2019t want to sail on this ship of fools\u201d does not apply to the FOMC!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s time for another musical reference, this time more obscure than usual.\u00a0 I was hoping to utilize the title of the 1990 album \u201cGoodbye Jumbo\u201d, but John Authers\u2019 column for Bloomberg beat me to the punch.\u00a0 We of course learned yesterday that the FOMC opted for a 25-basis point cut despite the faint expectations for something larger.\u00a0 For a few minutes during Powell\u2019s press conference yesterday, that album\u2019s minor hit \u201cWay Down Now\u201d seemed to apply, but as I begin typing this morning, the recording artist\u2019s name, World Party, was much more appropriate.<\/p>\n","protected":false},"author":4,"featured_media":230791,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[14700,18,6,8,9,26,3],"tags":[],"contributors-categories":[13576],"class_list":{"0":"post-230787","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ibkr-market-insights","8":"category-macro","9":"category-north-america","10":"category-region","11":"category-securities","12":"category-text-articles","13":"category-traders-insight","14":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Goldilocks Sparks a World Party | 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Jumbo\u201d,...","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/230787\/","og_locale":"en_US","og_type":"article","og_title":"Goldilocks Sparks a World Party | IBKR Campus US","og_description":"It\u2019s time for another musical reference, this time more obscure than usual.\u00a0 I was hoping to utilize the title of the 1990 album \u201cGoodbye Jumbo\u201d, but John Authers\u2019 column for Bloomberg beat me to the punch.\u00a0 We of course learned yesterday that the FOMC opted for a 25-basis point cut despite the faint expectations for something larger.\u00a0 For a few minutes during Powell\u2019s press conference yesterday, that album\u2019s minor hit \u201cWay Down Now\u201d seemed to apply, but as I begin typing this morning, the recording artist\u2019s name, World Party, was much 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