What the Trading Bots Got Wrong About the Fed Minutes
Despite an initial surge, the Dow closed down 167 points after the Federal Reserve released January minutes Wednesday afternoon. William De Lucy, Managing Director at Amplify Trading, was with us to break down why robots may have misunderstood the overall message delivered by the Fed.
He said the initial push higher was because algorithms were looking at the headlines, which were more dovish than the overall statement was meant to be. De Lucy said there are automatic word recognition programs that pick up words such as "gradual", which was connected to the pace of interest rate hikes. He said it seems like the algorithms got it wrong, and the A.I. was not intelligent enough.
Goldman Sachs came out with a report Thursday that revealed it expects 5 rate hikes. De Lucy said no one is expecting just three anymore. He added that one big deterrent for the Fed is that more rate hikes will cause equities to correct. Since President Trump has been putting such a focus on the strong stock market, Du Lucy expects we will see more inflation before we see rates go up.
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