Don’t Worry About Today Think About Tomorrow.

Markets have factored in a Fed rate hike and with a 100% probability of a Fed Hike on the Fed Funds Futures markets have said Wednesday rates will be hiked at 2pm. Markets expect a hike but importantly it’s what Yellen says in her speech post 2pm that is important.

Some economists are telling us that inflation is nearby and a risk. Most expect 3 hikes over the year with the betting on June and December after tomorrows hike. Others are a little circumspect. The issue will be how Yellen addressestomorrow’s audience and whether Yellen provides a very bullish outlook. A strong outlook could raise the prospect of an extra rate hike, in other words 4 rate hikes over the course of 2017.

On the day stocks slumped and crude fell. It appears as though the Saudis have been pumping a little more than expected oil. Oil was down 1.4%. The pound weakened as Theresa May was provided approval to progress in the UK’s exit from the EU. Markets were affected with today’s storm which will provide more problems tomorrow with sleet expected tonight and temperatures to drop to the low 20F, or -8C. Markets were late opening and Government Office openings were delayed by 3 hours. There is a chance that this storm will have a negative impact on the March GDP as many businesses were shut. Airlines cancelled flights to the North East with American cancelling all flights to NYC.

Bonds on the day were mixed with the 10 year Treasury trading to 2.59% before closing at 2.60. A level that Bill Gross believes signals a bear market if the 2.60% level is held for a week.

Robert Shiller of Yale Fame and Nobel Laureate entered the fray today cautioning markets that stocks may be in a large bubble and that stocks are very, overpriced. His point is that Traders have lost all caution and that the rhetoric of its all “a new era as espoused” by Trump is dangerous and does not bear any reality. For all the good points that Trump is trying to implement there are just as many bad points and that is Shiller’s point. Valuations are stretched.