Diary Week 66: What Will Jay DECide

Well, that was a week for the ages- both in terms of market moves and of course events. rarely does the Fed meeting play second fiddle to events but last week it clearly did with the election front and center.

Now we just have to figure out what lies ahead, and this week's diary focuses on just that.

What are the drivers now and how do markets look?

Let's start with the election. We know for sure that Donald Trump is the President elect as the 47th President of the United States. We also know for sure that the Republicans will control the senate.

If you believe "Decision Desk"?(as you probably should given how they pretty much got everything in this election right so far) 216 seats are a lock at this point in the house for the Republicans. In addition, they assess an 82% probability that the Republicans will control the house with a likely 220 projected seats. I am guessing that probably gets solidified next week.

So, the first observation I will make is that Jay said any policy decisions would likely be impacted only by legislation put in place rather than projected. I would respectfully disagree with him on that. A Red Sweep makes it a virtual certainty that we will very quickly see that stated Fiscal and regulatory policies put in place.

Do you really want to keep cutting rates on the basis of what you are seeing today when you know full well what is coming around the corner?

I argued before last week's Fed meeting that optionality would be put back on the table

I have also argued that both at last week's meeting and even more at the prior one that the Fed would do whatever Jay wants

I hear a lot of people saying that Jay was dovish last week and again I respectfully disagree.

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