November 1, 2016, 4:15pm EST

The Fed is on deck for tomorrow.  The RBA (Australian central bank) was a bit more upbeat overnight, as expected, per our discussion yesterday.

The BOJ stood pat as well overnight, though they extended the timeline on hitting their 2% inflation target.  That too, wasn’t much of a surprise.  Both the ECB and the BOJ have vowed to do “whatever it takes” for “as long as it takes.”  Still, for those looking for more easing out of Japan, they didn’t get it.  As we discussed yesterday, their latest policy move to peg the Japanese 10-year yield at zero is in the early days, but is working thus far.  It’s flipped the switch on the global market perception of an ever-deepening negative rates world. And it’s led to a weaker yen and higher Japanese stocks. Both good for the BOJ.

So ahead of the Fed tomorrow and the U.S. election results next week, the markets were pricing in a little more risk today.  A broad “risk-off” day means stocks go lower, yields lower, crude oil lower, gold higher and the VIX (a good market measure of uncertainty) higher.

As we discussed yesterday, the Fed has all but outright told us a hike is coming in December.  But they have explicitly shown us that they are as much, if not more, concerned about a shock to the system, as they are jobs and inflation in this environment.  And a hit to confidence, and therefore stocks, qualifies as a shock threat in their view.

With that in mind, they should be a bit more upbeat tomorrow, telegraphing the December move, but they are surely concerned about any confidence shake-out surrounding the election.

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