In the current scenario, effectively managing risk is paramount for investors regardless of how interest rates fluctuate, as emphasized by Terry Duffy, the CEO of CME Group.
During an interview on CNBC’s “Fast Money” on Wednesday, Duffy stated, “Over the past year, every prediction I’ve heard about the Federal Reserve’s actions has been completely inaccurate. It’s incredibly challenging to forecast the Fed’s decisions accurately.”
Duffy’s comments came in response to the Federal Reserve’s recent decision to raise interest rates by a quarter point, reaching a level not seen in 22 years. This increase marks the 11th rate hike by the central bank since March 2022.
He further remarked, “Many experts anticipated that the Fed would raise rates by 25, 50, or even 100 basis points and then halt. However, relying on such predictions for risk management would have led to significant disruptions in numerous smaller banks.” (A basis point represents one-hundredth of a percentage point.)
Duffy also emphasized the unpredictability of inflation and its crucial role in strategic positioning.
“Given the narrow profit margins, it is imperative for individuals to proactively manage the risk associated with inflation,” Duffy asserted.
Despite the Fed’s decision, the financial markets exhibited minimal reaction. The Dow Jones Industrial Average extended its winning streak to 13 consecutive days, the longest since 1987, by gaining 82 points and closing at 35,520. However, the S&P 500 and the tech-heavy Nasdaq experienced slight declines.
Reflecting on this, Duffy stated, “Instead of attempting to predict the markets, it is often wiser to listen to the markets themselves. They have their unique way of revealing their intentions.”
CME earnings beat
Following his comments on the Fed, Duffy’s company, the CME Group, reported better-than-expected quarterly earnings and revenue.
The CME Group, the world’s largest futures exchange, announced earnings per share of $2.30, surpassing the Refinitiv estimate by 10 cents. Its revenue of $1.36 billion also exceeded the Refinitiv estimated value of $1.34 billion.
Shares of the CME Group surged nearly 4% on Wednesday and have achieved a rise of over 11% in the past month.
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