The Markets are acting very odd. Interest rates and speculation are rising at the same time. With wonky forecasts for a U.S. recession, thus rates pauses and cuts. Energy prices are still too high relative to the USD

The Federal Reserve seems to be hellbent on mispricing and at the same time misfiring their so called fight with inflation.   To the point of an astounding lack of insight and/or guidance from their own metrics, which at the end of the day can and are flawed, apart from energy prices that are heading upwards again.  Yet, it is clear that inflation has not abated.   The Fed's rate pause on 15th June was expected by the markets, I however priced in a pause in July 2023, with a hike in June.  The broader market is now pricing in rate cuts, which is beyond misguided.   

Chart 1, shows the NADAQ 100 (candles), U.S. interest rates (orange line) and the Crude oil price (bar chart).  Below pane is the U.S. Dollar futures.    When the Fed lifted rates to 1.00% in May 2022, growth stocks or speculative shares such as the NASDAQ began to sell off, as did the oil price.  Which was a mixture of Biden's Strategic Petroleum Release and the beginning of the Russian/European oil caps which began to be implemented middle/end of 2022.   This all had a dramatic effect on the oil price, dropping it down from its $120 highs of June 2022 to it current trading range of $70 a barrel from December 2022 to date.  The Fed continued raising rates to its current range at 5.25%.   The USD rallied as you would expect, with speculation selling off.  

Note September 2022 (vertical purple line/s), when the USD reached it peak of 113, and rates reached 4.00% the USD began to sell off.  Which is unusual any more of less than the market steadfast in its projections that rate cuts are imminent in mid/late 2023 and going into 2024.   Even more unusual was the NASDAQ rally, which if they're were going to be a cut or pause in the Fed's rate cycle, it would be cyclical stocks (DOW/S&P) that would rally, not speculative stocks.

This points to two possibilities. 

1.  Liquidity is still abundant within the markets and has not tighten, despite the Fed lifting rates.

2.  The market is mispricing in a recession and not pricing in stagflation, hence the expectation that the Fed will cut rates.

The overall problem or dilemma that the Fed faces is that the oil price is sticky at $70, with European energy caps about to expire at the end of 2023 and the Biden administration begins to refill the SPR, we may indeed see a jump in energy prices towards the end of 2023.   Which will lead to further cost inflation across the board.

However what is alarming, is the Fed's rate cycle has not impacted on speculation, in fact it has thrived under interest rates.  This is of course a very rare occurrence with speculative trading and so called monetary tightening running hand and hand.  Telling, that rates are still too low.