Why the angst on Wall Street today? If the futures market was pricing in a 53% chance of a 25 bp fed funds rate cut, that means 47% were calling for something else. We can keep this whole analysis simple - that's close enough for 50/50 for me. Therefore, the market should have neither gone up a lot or down a lot, since theoretically, the discounting nature (efficiency) of the market had both outcomes priced on either side, close to a 50/50 type bet, although except for something extraordinary, such as a rate hike, or 75 bp cut or more. Therefore, neither side should have been enthused, nor dismayed. But we read and hear all sorts of dismay and disgust with the Fed, and all of a sudden the market declines 2% in less than a few hours.....Good luck efficient market theorists..surely didn't pan out today for you!
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