Did another country drop out of the Euro?

That’s the first thought that came to my mind last week.

I woke up at 3:00 A.M., groggy, and in a hotel in downtown Munich.

Part of me wishes I could tell you it was from a wild, lederhosen-and dirndl-filled night out on the down.

But it wasn’t.

It was actually early Saturday morning and I had landed in the Bavarian capital 18 hours earlier.

After a 13-hour flight, your editor finds it best to just sleep for as long as you need.

That’s what I did too.

Knocked out a lunch and a few mid-day meetings and then to the hotel to go down.

This coincided with the markets. I went to sleep when the U.S. markets opened up in the afternoon. All seemed well.

When awoke, I saw the Dow was down more than 400 and most every sector was slammed.

I jumped on online expecting some glaring headline.

What I found was quite the opposite and I think it means a lot to where stocks are likely headed in the next few weeks.

Stocks: Where To Next?

There wasn’t any big headlines at all.

On Yahoo Finance there was something political, something about Uber, and a few other things.

I checked Marketwatch. Checked a few worthwhile blogs.

Nothing there either.

Started hitting the phone. Sent texts to a few bankers and advisors I’m in regular contact with.

They didn’t have much to say. Although, I think that has more to do with it being Friday than anything else.

Then, I found it.

Yet again, it was the Fed.

Specifically, it was a small comment from one member of the Federal Reserve’s Board of Governors.

Eric Rosengren, president of the Boston Fed, said, “My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy.”

The market viewed the carefully worded statement as a warning sign rates could be going higher soon.

The odds of a rate hike from 15% to 24%, according to interest rate futures markets.

Still improbable, but not the direction short-term traders want to see it going and that’s why they reacted the way they did.

Of course, it all changed in a day. 

Another completely forgettable Fed governor said something that could be construed as meaning rates are not going to be hiked in the next few weeks and stocks recovered most of their losses.

In all, it was nothing and I expect it to be nothing for a long time.

Brexit 2.0?

The Fed statements are meant to imply it’s most worried about inflation, liquidity, and jobs.

It’s not.

It’s concerned about not shocking the markets.

Friday’s market action shows a poorly timed Fed move could spark a Brexit-like sell off.

Of course, we know that much like the Brexit, any Fed decision-driven chaos would be short-lived.

But it would be widely viewed as an “unforced error” and further reduce the credibility of the Fed and it’s clear at this point that’s what they really care about above all else.

That’s why we’ll continue to watch the Fed for a for one reason: because everyone else is watching it and any overreaction that comes is another great buying opportunity for the few stocks out there still worth buying.

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