Yesterday, Warton Professor and frequent market commentary Jeremy Siegel was on CNBC calling for an emergency 75 basis point Fed cut followed by another 75 bps in September "at minimum" as the market worries peaked.
Today, that sounds like an embarrassing overreaction to a stock market move with the Atlanta Fed Q3 GDP tracker sitting at +2.9% and yesterday's ISM services above 50.
To be sure, it's not a good look to be seen panicking but he wasn't the only one. Fed funds futures traders we putting real money on bets on an emergency cut and a whole host of dovish bets.
It's all looking like an overreaction that the market is correcting on its own.
I have a different take: The very existence of the possibility of back-to-back 75 basis point cuts (and more) is an incredible crutch for markets. If/when real pain does hit the economy, the Fed will be there and it has an incredible arsenal at its disposal with Fed funds at 5.25-5.50% and QT underway.
It's when the Fed is unable to help markets that they can really puke. That was the case when inflation was rising but now it's falling and 5-year inflation breakevens are now down to 1.9%.
Yes, the Fed will almost certainly be too late to cut rates but so long as inflation continues to trend lower (and $73 oil will certainly help), then it's hard to fight the Fed put.
