Pro Perspectives 9/16/22

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September 16, 2022

Yesterday we discussed the very well placed Fedex warning.

Not only was it unnecessary to pre-announce seven days before a schedule earnings call, but moreover, the Fedex CEO thought he needed to deliver a warning on the global economy.

Again, this act looks like it may have created cover for the Fed to under-deliver next week. If that’s the case, we probably have more tumult for markets going into Wednesday’s Fed decision.

Then, anything less than 75 basis points combined with a zealously hawkish tone would be a positive surprise for markets.

That’s a big event ahead. Let’s talk about the bigger event ahead. The November elections.

Below is a look at the model projections from FiveThirtyEight.

This shows a 71% chance of a Republican led House after November. And a 71% chance of a Democrat led Senate.

This is in-line with the averages from the national polling (which puts the house at 67% chance of a Republican led House, and a 65% chance of a Democrat led Senate).

What do the betting markets look like? The oddsmakers like about a 47% chance of a split Congress, and 33% chance of a Republican sweep. Three months ago, the betting markets were pricing in a 75% chance of a Republican sweep.

A split Congress would introduce gridlock into what has been run-amok/destructive policy making in DC. That would be good for markets.

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