The US Federal Reserve's 'hawkish pause' is precarious for equities, as the central bank retained its hawkish bias but removed key wording from its post-meeting statement. The Fed is most likely to stand pat, but any deviation from that plan would almost certainly entail more firming, not easing. Unlike previous pauses, there are substantial downside risks in the coming year, which means there is plenty of reason to temper enthusiasm about the pause in Fed policy.
The bears have greatly underestimated the strength of the US labor market. That’s the takeaway from Thursday’s sharp reversal in what turned out to be a fraudulent jump in initial jobless claims earlier in the month.