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How About Zero Rate Cuts this Year?
At the time of writing (April 7) – the market is pricing in three rate cuts this year. I don’t see it. In fact, I think there is a very good chance of NO rate cuts this year. Now that is not a scenario the market is pricing in. However, with inflation likely to remain stubbornly high – where property prices are not falling – and the labor market remains tight – why would the Fed cut? Let’s explore….
Immigration’s Impact on Jobs
The headline will read 303K new jobs were added to the economy for the month of May. And on the surface, it gives the appearance of a very strong number. However, how many of these were full-time jobs? And where were the jobs being added? When we look into the details of the jobs report – it paints a very different picture. My take: the headline number is not as strong as some assume.
S&P 500 +10.1% for Q1 – Can it Continue?
If you asked me at the end of December whether I thought the S&P 500 would be up ~10% at the end of the first quarter this year – I would have said “unlikely”. And yet here we are. With the promise of (coming) interest rate cuts and continued strong economic growth (implying growth in earnings) – US equities have arguably exceeded most analysts full year targets. For we have already exceeded all but 1 of 18 full year S&P500 forecasts “experts” made at the beginning of the year.
Powell’s Itchy Trigger Finger
Why does Powell think the Fed needs to cut rates? For me it’s curious. Itchy (trigger) finger maybe? What’s he so worried about? I was surprised by his (continued) dovish rhetoric and contradiction(s) last meeting. For example, on the one hand, growth is accelerating, inflation is falling and we have a strong labor market. Great! But we still need to cut rates and taper QT (soon!). I must be missing something – it’s hard to understand why the Fed is so keen to pull the trigger… what do they see we don’t?