CHART OF THE DAY: A sign the Fed's rate hikes are finally over
- The central bank appears more dovish following recent comments from several Fed members.
- They see little need for further interest rate hikes after the 10-year Treasury yield surged.
- The market currently expects the Fed to pause at its two remaining FOMC meetings of the year.
Our Chart of the Day is from JPMorgan, which shows that Federal Reserve members are starting to turn more dovish toward their future monetary policy actions.
The chart shows a significant decline in the JPMorgan Hawk-Dove index, which ultimately measures the sentiment of the Fed.
If the Fed, as a collective, is turning more hawkish, the chart moves higher and signals more tightening of monetary policy is likely in the form of interest rate hikes or balance sheet reductions.
If the chart is moving lower, it signals that the Fed is turning more dovish, which could translate to fewer or no more rate hikes.
Given today's context, the sharp decline in hawkish sentiment over the past few weeks suggests that the Fed is done hiking after its aggressive tightening campaign sent benchmark rates from near 0% in March 2022 to about 5.25%-5.5% today.
Here are some of the dovish comments from Fed members over the past week:
Dallas Fed President Lorie Logan: "If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the Fed funds rate."
San Francisco Fed President Mary Daly: "If financial conditions, which have tightened considerably in the past 90 days, remain tight, the need for us to take further action is diminished."
Philadelphia Fed President Patrick Harker: "Absent a stark turn in what I see in the data and hear from contacts... I believe that we are at the point where we can hold rates where they are. Look, we did a lot, and we did it very fast."
The so-called Fedspeak will pick up even more, with 21 scheduled speeches by central bankers this week, including Chairman Jerome Powell on Thursday.
The futures market currently expects the Fed to keep interest rates where they are at their upcoming November and December meetings. If Powell is instead leaning toward another rate hike, he will likely telegraph that in his comments to prepare investors.
But if the Fed sticks to its more dovish stance, that could be a tailwind for stock prices heading into year-end, according to Fundstrat.