Investors may have thought at the end of the year that fiscal policy would dominate macro discussions over monetary policy. Here we are in March and the key issue for the month will be the Fed meeting. Fed officials have telegraphed a possible rate hike which has been the driver in rate markets.

Surprisingly, the Fed talk has not significantly impacted equity prices. Equities continue to go up on business and consumer survey optimism and the expectation that fiscal policy will bend the economic growth curve. This optimism exists even with little headway on fiscal policy discussions. We see more talk about overvalued stock indices, but February moves show investors are little concerned and want to put money to use. Our biggest concern is that risk-seeking behavior is not discounting a more hawkish Fed.