Todd Gordon Sees Stocks Rising as 47-Bps Fed-2-Year Spread Signals No Rate Hike

1 articles · Updated · CNBC · Aug 4

A 47-basis-point gap between the fed funds rate and the 2-year Treasury is, in Todd Gordon’s view, too narrow to signal an imminent Fed hike, supporting further gains in stocks.
Fed funds futures still showed an 83.5% chance of an Oct. 28 increase after 95% a day earlier, but Gordon argues the 2-year yield typically leads Fed policy and has not moved far enough.
Since 1994, the first hike after flat or falling rates came with spreads of 69 to 160 basis points; today’s 47 bps sits well below the narrowest prior trigger in 2015.
That leaves persistent inflation, firm labor data and hawkish Fed rhetoric as market overhangs, even as Gordon says the summer breakout is unlikely to be an August head fake.