Pro Perspectives 9/16/22

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September 16, 2022

Yesterday we discussed the very well placed Fedex warning. 
Not only was it unnecessary to pre-announce seven days before a schedule earnings call, but moreover, the Fedex CEO thought he needed to deliver a warning on the global economy.
Again, this act looks like it may have created cover for the Fed to under-deliver next week.  If that’s the case, we probably have more tumult for markets going into Wednesday’s Fed decision.  
Then, anything less than 75 basis points combined with a zealously hawkish tone would be a positive surprise for markets.
That’s a big event ahead. Let’s talk about the bigger event ahead.  The November elections.  
Below is a look at the model projections from FiveThirtyEight.  

This shows a 71% chance of a Republican led House after November.  And a 71% chance of a Democrat led Senate.  
This is in-line with the averages from the national polling (which puts the house at 67% chance of a Republican led House, and a 65% chance of a Democrat led Senate).
What do the betting markets look like?  The oddsmakers like about a 47% chance of a split Congress, and 33% chance of a Republican sweep.  Three months ago, the betting markets were pricing in a 75% chance of a Republican sweep.
A split Congress would introduce gridlock into what has been run-amok/destructive policy making in DC.  That would be good for markets.