Fed Up

Good morning 🌅, and welcome to what should be a big end to the week on Wall Street:

  • The Federal Reserve will wrap up its meeting on Wednesday where they are expected to announce another rate hike in their effort to tame rising inflation.

  • U.S. Q2 GDP will be released Thursday, where investors will eagerly await the data on whether the American economy has contracted for two quarters in a row.

  • Over 1/3 of all S&P 500 companies are due to announce earnings this week, including Apple, Alphabet, Meta, Amazon, and Microsoft.

Let's see what the Kalshi markets are saying in anticipation of these blockbuster announcements:

Market Watch 👀

Will U.S. 2Q GDP Growth Be Positive? 📈

Yes: 39¢    No: 61¢    

Kalshi members are predicting a 39% chance that U.S. second quarter GDP growth will be positive and a 61% chance that U.S. second quarter GDP growth will be negative.


  • Janet Yellen, current secretary of the U.S. Treasury, has pushed back against recession fears. Referencing a strong labor market, Yellen acknowledged in an interview with NBC that economic growth is slowing but asserted that the traditional signs of a recession are not present in the current economy.


  • Larry Summers, ex-treasury secretary under Bill Clinton, stated the likelihood of the United States falling into a recession is "very high" in his recent interview with CNN. Summers referenced rising interest rates as a culprit that will slow spending and borrowing for businesses and consumers.

Fed Interest Rates 🏦

>2.25%?  Yes: 96¢   No: 4¢  

Kalshi members are predicting a 96% chance that the Federal Reserve will hike interest rates by 75 basis points or more. On the other hand, they are predicting just a 4% chance that the hike will be less than 75 basis points.


  • In response to the searing-hot June inflation report, which featured the highest monthly inflation rate seen in 40 years, many expect the Fed to repeat their June decision and hike interest rates by at least 75 basis points.


>2.50%? Yes: 9¢   No: 91¢

Kalshi members are predicting a 9% chance that the Federal Reserve will hike interest rates by 100 basis points or more in its July meeting. On the flipside, they are predicting a 91% chance that the rate hike will be less than 100 basis points.


  • Inflation surged in the month of June to 9.1%, the highest inflation rate seen in 40 years. The Fed may look to raise interest rates a whole point in response to this red-hot report.


  • In a recent interview, Atlanta Fed President Raphael Bostic cautioned against the federal bank acting "too dramatically" in response to the June inflation report. St. Louis Fed President James Bullard also leaned away from hiking rates a whole point in response to June inflation data in a recent interview.

Stay Ahead Of The Curve ⏰

Although this may be the most important week of the year for investors in terms of economic data, the issues of inflation and how the Fed will respond in terms of interest rates are not going away. The Kalshi team has created two dashboards to help individuals stay ahead of the curve on these two topics, forecasting inflation and the federal funds rate into the end of the year.

Because Kalshi's data is shaped by traders with money on the line, not economists or talking heads with no skin in the game, Kalshi has been able to predict inflation more accurately than even the Bloomberg Economists’ Survey, which is regarded as the gold standard of forecasting inflation.

Hedge Against The Heat 🔥

Across the pond, temperatures have been soaring to record highs this summer. In Britain last week, a temperature of ~105 degrees Fahrenheit was recorded; that is the highest temperature ever recorded in the United Kingdom.

These scorching temperatures have sparked large forest fires in Italy, Greece, and France. The mayor of London called it "the busiest day for the fire service in London since World War II".

The United States has not been spared from this record heat: across California, the Southern Plains, and the Upper Midwest, dozens of temperature records have already been broken. This has sparked massive wildfires, risk of power outages, and drought.

Lake Mead is the largest reservoir in the United States, providing water to California, Nevada, and Arizona. It has dipped to its lowest level since 1937, the year it was first filled. As of last week, Lake Mead was at 27% capacity.

This has been especially harmful to farmers in the Southwest, who now face significant water cuts.

With Kalshi's Lake Mead water level market, individuals can financially shield themselves from the threat of drought and scorching temperatures. By being able to trade directly on where the water level of Lake Mead will be in 2023, Kalshi members can hedge themselves against the risk of extreme heat and dry conditions.

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