Fed to Speak Soon -- Markets 'Pricing In a Dovish Rate Hike'

Can the market price in two things at once? Yes. Here's how.
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The Federal Reserve's Chairman Jerome Powell is set to speak Wednesday, and the market is telling us something two things at once. 

It's expecting a rate hike in December, but it isn't expecting hawkishness and four rate hikes in 2019. 

"The markets are pricing in a dovish rate hike," said Danielle DiMartino Booth, former adviser to the President of the Dallas Federal Reserve. The 10 year treasury yield was falling Tuesday to 2.83%. Investors have bought up treasuries of late, as stocks have taken a hit, so they'd priced in fewer rate hikes than previously expected, ahead of Powell's December 19 speech. 

So why are treasury yields falling even more? Bond investors don't think Powell is going to sound hawkish about 2019. One rate hike here in December doesn't necessarily mean hawkishness for 2019. And stock investors want to see Powell be dovish. 

"He {Powell} has to put in the verbiage that he is planning to pause," DiMartino said. Job growth numbers recently came in lower than expected, indicating softness in the economy, which doesn't exactly help any hawkish thesis. 

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