If you are long term investor, unless you are really really confident fed will cut by 50 bps, be careful in new positions heading into the announcement on Tuesday. The FF (fed futures) is priced in at 50 bps, but there is a reasonable chance that it will only be 25. If it is only 25, disappointment will likely occur to a degree and could send the markets down, as 25 bps is priced in as a certainty in FF. A 25 bps cut is likely being reflected in current prices, though there may be surge or some type of frenzy on Friday due to retail investors who don’t know this buying up everything after the Fed announcement, or just because of general sentiment. In which case, that could lead to a long squeeze of sorts.
But that’s all hypothetical and getting the cart ahead of the horse.
Either way, this could be a tricky week to navigate if you are anything but a day trader. I like to take the side probability and not shear speculation, and right now the upside to 50 bps would probably be quite less than the downside of a 25 bps cut. So I will be waiting until later in the week before I start adding or taking on new positions as an investment.
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