Worsening Macro Environment Lifts Stocks

The FED downgraded the Economic Outlook yesterday despite removing the "Patient" wording.

For the past few months, worsening outlook and worse data is stock market positive.

SPX regained 2100. Bonds rallied over a point, and as expected there was a dollar sell off. One of the more notable moves was in the Eur/Usd, which moved up over 400 pips on the announcement only for it to pare the whole move by today.

Euro fundamentals haven’t changed, so the big move up was exaggerated by stops before coming back to pre-announced levels.

This is the type of move which has made it harder to keep a position on. Since the swings are very big , deep pockets are required to withstand the moves.

As far as the FED decision goes, it wasn't surprising. Like I've been tweeting, they don't have the conviction to move forward with monetary policy. Since there is such a divergence with Europe in terms of economic progress.  Given the strong Dollar, it is unlikely they will pull the trigger, which is going to leave easy money stimulus on the table for even longer, which may or may not have big repercussions in the future, with the main threat  being the inflated stock market.

As far as interest rate Spreads go, shorting Short Sterling was the play as the Spreads have all come back down after a 10 tick move up. I was short 11s in the Mar17Jun17 to take a tick. It is close to trading 9s now, I will look to initiate a long position at 8s if it gets there. I prefer playing the back months as the range is much tighter, so makes picking the levels much more predictable.

 I'm still a buyer of volatility, although I’m feeling the heat on those positions. There seems to be no fear, and at this rate it looks like volatility ETFs will go to zero as drag weighs on the products, but I still believe there will be a meaningful sell off some point soon, which will push volatility up.