Online bettors are placing little likelihood of a tapering announcement being made at next week’s Federal Reserve meeting in Washington.
The odds of no announcement from the Sept. 21-22 gathering were 93% as of Monday, according to the new online trading platform Kalshi. That is up from roughly 69% on Aug. 30. More than 8,000 contracts were traded on the anticipated outcome, with each contract pegged to one dollar and percentages expressed as cents.
One big question on the minds of investors has been how much the U.S. stock and bond markets can stand on their own once the Fed finally starts to pare its $120 billion of monthly asset purchases. A disappointingly weak U.S. monthly jobs report for August — on top of ambiguity from Fed Chairman Jerome Powell’s Jackson Hole speech — has damped expectations that the Fed might announce tapering this month, given the need for policy makers to wait for further labor-market improvement. Still, at least one nonvoting official, Robert Kaplan, says he expects to support such an announcement next week.
“Over the last few weeks, markets have decided that a tapering announcement is highly unlikely to occur at the next meeting,” said Will Arnesen, a former senior research analyst for the Federal Reserve Bank of New York, who now works on Kalshi’s markets team. “That is largely on the basis of Powell’s speech at Jackson Hole, as well as the latest jobs report.” The 7% chance that there may be an announcement next week reflects “a risk that markets would react heavily” to.
Kalshi was funded by Sequoia Capital; Charles Schwab, chairman of Charles Schwab Corporation
; and Henry Kravis, co-chairman & co-CEO of KKR & Co.
among other investors. The platform, a CFTC-regulated financial exchange, began operating live in July — giving investors the chance to buy “Yes” or “No” positions on the anticipated outcomes of future events. The September Federal Open Market Committee contract opened on Aug. 29, but didn’t begin trading with meaningful volume until last week.
On Monday, U.S. stock indexes rose, putting the Dow Jones Industrial Average
and S&P 500
on track for the first positive finish in six sessions. Meanwhile, Treasury yields
edged slightly lower.