If Risk Trends Don't Recover Following Fed Hold, Beware
• The Fed met expectations by holding its benchmark rate to a range of 0.00 to 0.25 percent
• An initial reaction of a Dollar slip and equity rally met expectations, yet those reactions didn't hold
• If risk appetite - using S&P 500 as a benchmark - falters despite the Fed, the implications are troubling
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A hold on rates by the Fed should lower the Dollar's yield advantage and invigorate risk taking. That would be the natural course according to the dominant market dynamics of the past years. Yet, those norms don't seem to be playing out with the same level of gusto that we have seen in previous months and years. A delay in rate hikes was significantly discounted ahead of the event. More importantly, market participants are showing less enthusiasm for a reach for tepid returns as systemic risks build in the background. Moving forward, the Dollar's slip on this important event risk will conform to its standing in the monetary policy spectrum. It is the 'risk' consideration that can materially change the landscape for market performance and sentiment bias. We take stock of the Dollar and speculative markets' bearings following the Fed's hold in today's Trading Video.
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