Markets are now near convinced that tomorrow brings a 75bps increase in the Fed Funds target rate, the fifth consecutive rate hike from the Federal Reserve since the start of the year taking the US benchmark to 3.25%. Just as a point of reference, the S&P moves on the day of and 2 days following each FOMC move:

– 16th Mar: Fed Funds +25bps / 16th, 17th, 18th Mar: S&P +2.2%, +1.2%, +1.2% / CFTC Emini speculative position +102,201

– 4th May: Fed Funds +50bps / 4th, 5th, 6th May: S&P +3%, -3.6%, -0.6% / CFTC Emini speculative position +121.775

– 15th Jun: Fed Funds +75bps / 15th, 16th, 17th Jun: S&P +1.5%, -3.3%, +0.2% / CFTC Emini speculative position +34,278

– 27th Jul: Fed Funds +75bps / 27th, 28th, 29th Jul: S&P +2.6%, +1.2%, +1.4% / CFTC Emini speculative position -237,635

– 21st Sep: Fed Funds +75bps? / S&P ???? / CFTC Emini speculative position -244,261

Admittedly this doesn’t tell us an great deal barring the markets have generally been relieved on Fed Day, despite ever aggressive tightening as positioning has shifted sharply bearish. And volatility around data releases has picked up markedly (the 4 St Dev slump on the latest US CPI print being a case in point!).