Massive change over the past 5 weeks when it comes to what the market is pricing from FED
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”History shows only central banks end melt-ups”… Source: BofA, Wasteland Capital
Fifth cut in a row... Dropping the policy rate from 5% to 3.25% in 2024—150 bps total. But it’s not working fast enough: -Unemployment: 6.8% (highest in 8 years). -GDP per capita: Down 6 straight quarters. -Canadian Dollar $CAD at 4.5-year low -Former BOC Governor says “We’re already in a recession.” Market is pricing in another ~50bps of cuts by July 2025 ➡️ 2.75% overnight rate. Source: Genevieve Roch-Decter, CFA, Bloomberg
Market is pricing an 86% probability of a 0.25% rate cut, up from 73% last week. This comes after the November job report showed a lot of weakness under the surface. The Fed cut rates by 0.50% and 0.25% in Sep and Nov. Source: Global Markets Investor