If you’ve been keeping an eye on the financial markets, you’ll know that the Federal Open Market Committee (FOMC) has been quite active, and 2024 is shaping up to be a pivotal year. We’re expecting a total of 75 basis points (bps) in rate adjustments for the year.

The FOMC’s movements are like the ebb and flow of the sea; they can either gently guide the markets or cause significant waves. This year, they’ve decided to guide us towards what could be a semblance of stability, or at least that’s what the numbers are hinting at for 2024. We’re looking at a similar pattern for 2025, which suggests that we might be in for a steadier ride. But as always, the caveat is that economic forecasts are as predictable as weather in April — take it with a grain of salt.

We’re also talking about a probability consistent calibration here. It’s a fancy term for aligning predictions with likely outcomes based on current data. It’s like setting your watch to a time signal — it’s meant to ensure that you’re as accurate as possible given what you know right now.

So why do we like being “short vol,” or betting against volatility, in this environment? Simply put, it’s because the prices right now reflect a lot of the potential changes. When the market prices in certain expectations, it can sometimes overshoot the actual risk involved, providing opportunities for those who can read between the lines.

In summary, we’re positioned for what we think the FOMC will likely do based on their recent patterns and current economic indicators. It’s not about having a crystal ball, but rather about understanding the rhythms of the market and dancing to the beat that’s being set by those who hold the metronome — the FOMC.