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Was Yellen Really More Hawkish?

Markets fell yesterday after Fed Chair Yellen’s press conference, in
which markets interpreted her remarks as slightly more hawkish.  I
didn’t really get that sense, and still feel like the Fed will remain
data dependent in their timing of when to hike interest rates.

But when she answered a question by saying the Fed may hike six months
after the tapering ends, many interpreted that to mean April of next
year vs. current fed fund futures estimates of mid-2015.  So did she
intentionally move up the possible date for the first rate hike?  Or was
she just still using broad brush stocks and general guidelines to give
the markets continued transparency?

Our markets started off today lower as well, but after some economic data came out markets bounced back into positive territory.

February existing home sales hit 4.60 million units, which was only
slightly below the previous month’s rate.  Leading indicators for
February rose 0.5%, better than expected.  And the Philly Fed Survey for
March rose to 9.0 from -6.3 the prior month.

Asian markets were lower across the board overnight.  China’s State
Council announced plans to speed up construction projects in order to
stabilize economic growth.  Europe’s markets are also lower today.

Bond yields shot higher yesterday after the FOMC, with the 10-year
breaking above its 50-day average to 2.77%.  Its steady so far today.

The volatility index also reversed higher to get back above the 15 level.  It sits at 15.25 currently.

Trading comment: Our sense is that yesterday’s selloff was
more just a reaction to some confusion about whether the Fed was
changing its tune at all or becoming more hawkish.  We think this
bearish sentiment is likely transitory and short-lived, and would
continue to use weakness to add to our positions and continue to put
excess cash to work.  The stock market is up less than 1% on the year so
far, something we don’t expect to last too long.

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