RATE CUTS ON WALL STREET’S RADAR
📉 Wall Street anticipates Federal Reserve rate cuts in 2024, shifting from a historic inflation-fighting campaign. Interest-rate futures show a 50% chance of a quarter-point rate cut by May 2024, with expectations of four cuts by year-end, according CME data. This prediction, despite varying economic paths, has fueled a near 9% rise in the S&P 500 this month.
📊 The bond market reflects these rate-cut bets, with longer-term bond yields falling below short-term ones, hinting at a possible recession. Investors hope for a scenario where inflation aligns with the Fed’s 2% target, allowing for modest rate cuts as a precaution against economic slowdown, despite mixed economic signals including decelerating inflation and concerning unemployment rates.
🏦 Despite investor optimism, the Fed remains cautious about rate cuts, focusing on achieving their inflation target. The stock market’s recent surge contrasts with previous trends, driven by lower long-term Treasury yields and reduced fears of a recession triggered by high borrowing costs. Investors should remain aware of the possibility of no rate cuts in 2024, depending on economic resilience and inflation moderation.