Wall Street already positioning for a post-rate-hike world

economictimes.indiatimes.com:

Wall Street is so convinced that the Federal Reserve's restrictive policies are nearing an end that money managers are already trading as if rate hikes were a thing of the past.JPMorgan Asset Management is plowing into equities and at least one Invesco fund has done an about-face from its previous cautious positioning. DataTrek says investors are now betting on individual stocks instead of trading on macro themes.

Traders and economists are in near-unanimous agreement that the Fed will raise rates by a quarter percentage point Wednesday. Views diverge on how long the central bank will keep rates high and if another hike by the end of the year will be necessary.

But one narrative is clear: The disinflationary process is underway, which means the jumbo rate hikes and volatility that came with them are firmly in the past. «The market has now fully digested that plus or minus 25 basis points, the hiking cycle is coming to an end,» said Alessio de Longis, senior portfolio manager of the $1.1 billion Invesco Global Allocation Fund and head of investments for Invesco Investment Solutions.

«In this regard, more surprises, more catalysts for volatility are going to come from the European Central Bank or the Bank of England, where I think rate hikes have more to go, not from the Fed.» Options traders expect the S&P 500's trading range from Monday through the end of the Federal Open Market Committee meeting Wednesday to be the tightest since November 2021, according to Citi's Stuart Kaiser. This signals the market has more clarity about the Fed's decision as economic data stabilizes, he said.