A Hawk In Dove's Clothing ... June Swoon Is Back ... 'We Have A Task Force On That'

We weren't surprised by most of the news following today's FOMC meeting. We expected the committee to pivot from April's easing bias to a tightening bias, and they did. We expected the committee to acknowledge that, in their dual mandate, the risk of higher inflation had risen, while the risk of higher unemployment had fallen, and they did. The FOMC's Summary of Economic Projections (SEP), including the Dot Plot, unambiguously confirmed the committee's hawkish pivot.

We expected a June Swoon in the stock and bond markets because investors hadn't fully discounted our hawkish Fed scenario. The stock market swooned today as yields rose. The 2-year US Treasury note jumped to 4.20% today in response to the FOMC news (chart).