IBKR Podcasts The Dot Plot Thickens
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Sep 17, 2025 In this engaging discussion, Kevin Davitt, Head of Index Options Content at Nasdaq, shares his insights on Fed policy and labor market dynamics. He predicts a modest market reaction and dives into the implications of the latest dot plot for investors. Kevin explains how large-cap tech stocks are navigating interest rate changes and highlights the labor market's influence on future market directions. Additionally, he discusses why the cadence of earnings is unlikely to significantly impact options volumes, providing a comprehensive view of current trends.
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Muted Market Reaction To Fed Meetings
- Markets have largely priced in Fed moves, so individual meetings often produce muted reactions.
- Kevin Davitt expects a 25bp cut and a return to 'business as usual' after the announcement.
Dot Plot Versus Market Expectations
- A large gap exists between the Fed's dot plot and futures pricing for year‑end rates, signaling market expectations of more cuts.
- If the Fed's projections don't move down, markets may view the update as relatively hawkish.
Labor Market Driving Fed Focus
- The market is pricing about three more cuts this year while the Fed previously signaled higher year‑end rates.
- Attention appears shifting from inflation toward the labor market when setting policy.