Lorie Logan, President of the Federal Reserve Bank of Dallas, said on Friday at an event at Columbia University that uncertainty in the US economy remains high. She said the tech sector is one of the biggest sources of that uncertainty. Logan said she supported the Federal Reserve’s January decision to keep policy unchanged as the job market stabilises. She said she is cautiously optimistic that inflation can return to the Fed’s target, but she is not yet convinced it will reach 2%.

Tariff Uncertainty And Next Steps

She said tariff uncertainty has increased following a court decision. She said many factors will shape the outcome of that decision, and it is not clear what happens next. Logan said upside inflation risks remain, and that policy is in a good place to manage risks to the Fed’s mandate. She said she is concerned that demand could grow faster than supply. On the labour market, she said it does not appear that AI is replacing workers. She said the current break-even level for job growth is about 30,000 jobs per month. She said banks should aim for a diverse depositor base. She also said banks should be ready to access liquidity when needed.

Market Volatility And Rates Outlook

Ongoing economic uncertainty and persistent inflation risks suggest we should be ready for higher market volatility. Since a return to 2% inflation is not guaranteed, the Federal Reserve may keep a hawkish tone and push back on expectations for near-term rate cuts. In this setting, buying volatility through options on major indices such as the S&P 500 may be a sensible approach in the coming weeks. Recent data supports this cautious view. The January 2026 jobs report showed payrolls rose by 210,000, well above the 30,000 break-even level Logan mentioned. The latest CPI report also showed core inflation remains stuck at 3.4%, which suggests the final stage of disinflation could be difficult. The VIX, a key measure of expected volatility, has moved up from recent lows and traded above 17 last week. Interest rate futures still price in at least two rate cuts by the end of this year, but that now looks too optimistic. Derivatives traders may want to position for a “higher for longer” rate backdrop. This could include using SOFR futures or options to bet against the market’s more dovish expectations for the second half of 2026. Logan’s focus on uncertainty in the tech sector is also a clear signal for that part of the market. Higher rates and unclear growth tend to weigh on growth stocks, where valuations depend on profits far in the future. Traders may want to hedge long technology exposure, for example by buying put options on a Nasdaq 100 tracking ETF. This setup looks similar to what markets saw through 2025. During that period, traders who tried to anticipate a quick Fed pivot were often disappointed, as policymakers held firm while inflation stayed elevated. Logan’s comments suggest that a repeat is possible, where patience and caution may pay off. One new risk is the court decision on tariffs, which adds uncertainty around supply chains and input costs. This could create additional upward pressure on prices that markets may not have fully priced in yet. That strengthens the case for holding protection against unexpected market moves. Create your live VT Markets account and start trading now.

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