Global signal: Markets now fully pricing in 3 aggressive hikes by July

The hawkish Fed-speak drove markets – there were three Fed speakers and it culminated with the Fed Chair, Jerome Powell and his statements.

This drove markets, the S&P500 down 1.25 percent, the NASDAQ down 2 percent, US treasury yields, through the curve, jumped 5-year, 10-year, 30-year, oil prices were up about two bps and as a result, the markets are now pricing in full three 50 bps hikes by July.

Jerome Powell, the Fed Chair, made two appearances. In the first speech, he focused on Paul Volcker, the legendary Fed Chairman, who increased interest rates from 11 percent to 20 percent in two years, from 1979 to 1981 in a bid to control inflation. Unemployment soared above 10 percent. So he's admiring Paul Volcker and he basically saying that he had to stay the course, act vigorously to slay inflation. The question mark for markets is he's admiring the man, will he tread the same path? Nobody believes that it's going to be that dramatic or that drastic, but he's invoking the legend of Paul Volcker here.

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Then Powell said 50 basis points (bps) is on the table for May as labor market is unsustainably hot. So May is a done deal. But markets have been pricing that in for some time. To a pointed question, whether beyond the 50 bps in May, could there be three consecutive 50 bps hikes, he had to say this. “Our expectations for inflation is to come down, have been disappointed in the past, we are really going to have to raise rates and getting rates faster to neutral and actually tight, if appropriate.” So this is not a good news for markets.