Volatility Trends to Monitor & Ways Fed Will Rattle VIX Momentum

• The FOMC meeting is considered 'live,' with a 31% market probability of a rate hike, up from 10% two weeks prior.
• A 'surprise' rate hike (e.g., 25 basis points) could enhance the Fed's credibility by demonstrating seriousness about inflation targets and independence.
• Such a hike might cause a rally in the long end of the yield curve, which is positive for long-duration assets like stocks and the broader economy.
• The Fed is likely to look past short-term energy price fluctuations and focus on persistent inflation above target.
• Mega-cap earnings reports this week are expected to be a more significant market driver than the FOMC decision itself.

The discussion centers on the Federal Reserve's upcoming rate decision, with Zed Francis predicting a potential surprise 25 basis point hike. He argues that such a move, while initially causing short-term volatility, could strengthen the Fed's credibility and lead to a rally in long-dated interest rates, ultimately benefiting risk assets and the real economy. Mega-cap earnings are also highlighted as a significant market driver this week.