Manage risk because people got Fed dead wrong

It’s vital for investors to manage risk right now no matter where interest rates go, according to CME Group chairman and CEO Terry Duffy.

“Everybody that I’ve talked to over the last year has been dead wrong when it comes to what the Fed was going to do,” Duffy told CNBC’s “Fast Money” on Wednesday. “It’s really hard to predict what the Fed is ultimately going to do.”

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Duffy’s call followed the Federal Reserve’s decision to hike rates by a quarter point to a 22-year high. It’s the central bank’s 11th rate hike since March 2022.

“Everybody said the Fed would raise 25 basis points, 50 basis points, 100 basis points and stop,” he said. “If you would have managed your risk based on what you thought the Fed was going to do or not be doing, you would be out of business like we’ve seen a lot of the smaller banks.”

Duffy added the idea inflation is still unpredictable is also critically important to positioning.

“People need to manage that risk because margins are thin,” he said.

The markets barely flinched after the latest Fed decision. The Dow rose for the 13th day in a row for its longest win streak since 1987. The blue chip index gained 82 points to close at 35,520. Meanwhile, the S&P 500 and tech-heavy Nasdaq closed slightly lower.

With three trading days remaining, the three major indexes are still higher for July.

“Boy, if you’re going to try to sit around and try to make a prediction, sometimes it’s better instead of talking the markets, you should listen to the markets,” Duffy said. “They’ll tell you what they want to do.”

Duffy’s Fed reaction came hours after his company reported quarterly earnings and revenues beat.

The CME Group, which is world’s largest futures exchange, reported earnings per share of $2.30 — ten cents above the the Refinitiv estimate. It reported revenues of $1.36B versus $1.34B expected by Refinitiv.