Apparently, the 'market' is pricing in 4-6 rate cuts in 2024. Meanwhile, the Fed hasn't indicated anything like this, maintaining that they will stay the course until inflation is firmly headed down towards 2%. Inflation is not headed down to 2%.
If you have financial models inter or extrapolating rates from market expectations, there is a decent chance that they will give you the wrong results. In this case, it pays to have cause and effect in the right order. Rate cuts will be caused by the Fed, and not the markets - it's black and white. Many times it's not so cut and dried and we have got things wrong.
I am hoping for rate cuts, but I'm. not sure we will see 4-6 this year, based on what the Fed has been saying. The fundamentals seem to suggest it's not happening. Do we always work with fundamentals though? No, remember there is an election coming up, and fundamentals could go out the window. End of the day, it's so fluid that the best way to describe what the market is doing as 'betting'. The bets may be right, or wrong - time will tell, but it would be prudent to remember that these are bets.
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