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 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.”

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.” A basis point is one-hundredth of a percentage point.

Duffy added that inflation is still unpredictable and 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 Jones Industrial Average 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.

“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.”

The CME Group, which is world’s largest futures exchange, reported earnings per share of $2.30 —10 cents above the the Refinitiv estimate. It reported revenue of $1.36 billion versus $1.34 billion expected by Refinitiv.

Shares rallied almost 4% on Wednesday and are now up more than 11% over the past month.

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