Janet Yellen’s testimony today and new historic highs in the NASDAQ-100 Index have likely tipped the scales for a 25bps tightening at the December 16th meeting (currently near 50/50 in the futures market).

  • The October unemployment number on Friday should be a key determinant for potential Fed tightening at the December meeting.  As expected will probably be a green-go. Unless the Oct. unemployment number is weaker than expected, confirming the weak Sept. number and unless the November number is weaker than expected, the Fed should tighten 25bps at the December meeting
  • The Fed seems initially focused on getting off zero, then will likely let markets dictate the pace of rate increases (to quote NY Fed Governor Dudley), despite being well below their inflation target
  • “Excessive risk taking” was mentioned by both Janet Yellen and William Dudley, a few months ago. The NASDAQ-100 extending new record highs is a green-go indication for beginning the tightening cycle
  • How the stock market reacts should be the key determinant for gold prices.  There may be some sell the rumor, buy the fact support in gold, but if stocks don’t go down, gold should come under pressure