<p>Happy Thursday traders. I write this article the night after markets put up their worst day in a long time, as memories of December 2018 come front and center, when a hawkish Fed sent markets tumbling and erased all their gains.</p><p>The issue for markets today was the Fed’s dot plot, which made an abrupt shift in 2025 outlook that really doesn’t come to a surprise to me personally; the issue is traders were not positioned for this new reality, hence the selloff. </p><p>Markets and traders came into this FOMC meeting anticipating a forecast showing at least three rate cuts for 2025, and now they’re pricing in just over one rate cut, up to 50bps at the most. This is a hawkish pivot, but a pivot that anyone who had an objective approach to markets and Fed analysis could have seen coming for a while now. It’s been multiple months in a row where we’ve seen hot inflation prints, just last week we saw a hot PPI print. The explosion in volatility again today was in part due to folks not being properly hedged into the event. With a lack of hedges in place it allowed the VIX to explode higher, helping fuel the selloff. </p><div class="captioned-image-container"><figure><a class="image-link image2 is-viewable-img" href="https://substackcdn.com/image/fetch/f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F35e0eebc-013f-4936-82c3-f40d23f77642_2007x1926.png" target="_blank"><div class="image2-inset"><source type="image/webp" /><img alt="" class="sizing-normal" height="1397" src="https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F35e0eebc-013f-4936-82c3-f40d23f77642_2007x1926.png" width="1456" /><div class="image-link-expand"><div class="pencraft pc-display-flex pc-gap-8 pc-reset"><div class="pencraft pc-reset icon-container restack-image"><svg class="lucide lucide-refresh-cw" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><path d="M3 12a9 9 0 0 1 9-9 9.75 9.75 0 0 1 6.74 2.74L21 8"></path><path d="M21 3v5h-5"></path><path d="M21 12a9 9 0 0 1-9 9 9.75 9.75 0 0 1-6.74-2.74L3 16"></path><path d="M8 16H3v5"></path></svg></div><div class="pencraft pc-reset icon-container view-image"><svg class="lucide lucide-maximize2" fill="none" height="20" stroke="currentColor" stroke-linecap="round" stroke-linejoin="round" stroke-width="2" viewBox="0 0 24 24" width="20" xmlns="http://www.w3.org/2000/svg"><polyline points="15 3 21 3 21 9"></polyline><polyline points="9 21 3 21 3 15"></polyline><line x1="21" x2="14" y1="3" y2="10"></line><line x1="3" x2="10" y1="21" y2="14"></line></svg></div></div></div></div></a></figure></div><p>The next dot plot will be released in the March FOMC meeting, three months away. There’s a lot of time between now and then for the economy to show further signs of strength (strong jobs report, higher CPI/PCE prints), or for the exact opposite to occur. Time will tell, but after Powell’s comments today + the new dot plot, we’re likely going to see a pause in January, and maybe a 25bps cut in March depending on the econ data between now and then. It’s entirely to early to try and pinpoint when the Fed will cut again in 2025, but I don’t think we see a large 50bps cut at one time, we’re likely going to see two separate 25bps cuts with some time in between them.</p><p>Before moving onto the one setup I have to share for the remainder of the week, I want to remind everyone of the holiday sale currently going on. Click on the link below to lock in a 40% discount on your subscription today! 2025 is going to be a big year and I’m entering the new year with some of my strongest convictions yet for my core trades.</p><p class="button-wrapper"><a class="button primary" href="https://fathertimechronicles.substack.com/subscribe?coupon=e85c6344&utm_content=153344515"><span>Get 40% off forever</span></a></p>
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