Hi YXI friends,

Today, we are going to review the FOMC meeting from yesterday (July 31, 2024), the updated Fed Funds yield curve since the meeting, and how to weigh between different Treasury ETF instruments to take the full advantage of the upcoming cycle.

For our Premium members, the advantage of accessing today’s full report is the experience and expertise from someone who has traded interest rates around the FOMC events at an institutional level.

Included in this report is also an update on the seasonality trends for SPY, QQQ, and IWM in August, on both a monthly and daily basis. Don’t miss out - there is a very surprising finding for election years (at least to me)!

Let’s dive in.

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. (July 31, 2024) FOMC Press Release: What changed and what didn’t

Job market slow down acknowledged

Instead of job gains remaining “strong”, the Fed highlighted that they have “moderated” and unemployment rate has “moved up”.

This shows that the labour market has the potential to move into an uncomfortable territory for the Fed, but not just yet.

Inflation progress upgraded, but not quite there

The Fed upgraded the language around inflation from “modest further progress” to “some further progress”.

This upgrade falls short of claiming a victory on inflation, which the market did suspect in advance. The Fed is currently divided on what constitutes as enough evidence for inflation sufficiently moving towards the Fed target. At least half of the Committee (shown as zero or 1 dot in the June Dot Plot) believe more data are needed before cutting.

Moving from eyes-only-on-inflation to weighing the labour market too

In the June meeting, the Fed was “highly attentive to inflation risks”. Now, the Fed is attentive to the “risks to both sides of its dual mandates”.

Given that the Fed’s dual mandates are “Maximum Employment” and “Price Stability, the Fed is admitting that labour market could soften beyond the expectation if they keep interest rates high.

2. Why did the Fed NOT cut rates this meeting?

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