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22 Mar 2024

The Fed wants to loosen into what has already been the largest effective easing of financial conditions that we've seen from peak to trough...

equity markets, gold and digitalgold absolutely love it! Source: Markets & Mayhem

21 Mar 2024

BREAKING: The Federal Reserve on Wednesday held interest rates steady as expected but signaled that it still plans multiple cuts before the end of the year.

FED HOLDS BENCHMARK RATE IN 5.25-5.5% TARGET RANGE - BBG *FOMC MEDIAN FORECAST SHOWS 75 BPS OF RATE CUTS IN 2024 TO 4.6% *FED REPEATS WAITING FOR GREATER CONFIDENCE ON INFLATION TO CUT As expected, the Fed kept the Federal Funds Rate unchanged. The main news is that the 2024 median rate forecast in the new Federal Reserve dot plot remains UNCHANGED! The Fed continues to expect three rate cuts (-75BPS) for 2024 ! Fed Officials median view of Fed funds rate at end of 2024 4.6% (prev 4.6%). Fed projections show only one official sees more than three 25 bp rate cuts in 2024. Fed now only sees 2 rate cuts in 2025 and fewer cuts in 2026. Fed made only one change to the FOMC statement: Thus is in January: "Job gains have moderated since early last year but..." replaced by this in March: "Job gains have remained strong and..." The projected change in real GDP for 2024 was 2.1% in the March projection, up from 1.4% in December. Core PCE inflation projections also ticked up to 2.6% from 2.4%.. Fed says inflation "has eased but remains elevated". Fed does not expect rate cuts until "greater confidence" inflation is moving to 2%. Market reaction: Equity markets are rallying after the FOMC announcement: The S&P 500 has officially broken above 5200 for the first time in history. The dollar is weakening and US Treasury yields are stable (the 10 year initially lost 5 basis points). Our take: Markets are rallying on the initial headlines from this Fed rate decision. Primarily because Fed projections for 3 rate cuts in 2024 have been reaffirmed. Indeed, the risk of a hawkish surprise (lower dot plots for 2024) was quite elevated ahead of the FOMC decision based on recent economic activity data (Atlanta Fed GDPNow currently at 2.5% for Q1 24). The fact that the Fed keeps 2024 DOTS unchanged was the best scenario for the market. The two objectives of the Fed (maximum employment and stable prices) are (almost) perfectly reached. The Fed can relax and afford to “wait-and-see” before eventually recalibrating (most likely in June). Note that Powell’s press conference will also be important for the nuances and context around the potential adjustments to dots and economic projections. In terms of portfolio positioning, we remain constructive on equities but more cautious on fixed income. We keep some allocation to Gold.

21 Mar 2024

FED holds benchmark rate, May cut remains unlikely

The US Federal reserve holds benchmark rate in 5.25-5.5% target range. Jerome Powell prepared remarks and Q&A answers were more dovish than during the January meeting. FOMC median forecast remains at 75 BPS rate cuts for 2024, but the forecast increased from 3.6% to 3.9% in 2025.
Gold reacted to Powell's dovish tone by jumping to a new record high and breaking the 2200 level.

Source: Bloomberg

28 Feb 2024

Interest rate cut expectations continue to scale back: Markets now see a ~38% chance of 4 interest rate cuts in 2024

Just over a month ago, the base case showed a 50%+ chance of 6 interest rate cuts in 2024. Meanwhile, odds of a March rate cut are down to 3% and odds of a May rate cut are down to 19%. For the first time in 2024, markets are close to the Fed's latest guidance of 3 cuts in 2024. Source: The Kobeissi Letter

9 Feb 2024

Here's the current expectation on Wall Street regarding the actions of the US Federal Reserve in 2024.

source : wsj, ntimiraos

5 Feb 2024

One reason the Fed is a bit nervous and signalling and end to their hiking cycle?

Real Fed Funds rates are the highest in over 20 years... Source: Markets & Mayhem, BofA

2 Feb 2024

The Fed's balance sheet is now at its lowest level since March 2021, down $1.3 trillion from its peak in April 2022.

How much more QT is needed to unwind the massive QE from March 2020- April 2022? $3.5 trillion. Source: Charlie Bilello

2 Feb 2024

The Fed said that a March rate cut is "unlikely," yet futures are still pricing in a 39% chance it happens

Even as the Fed said they cannot cut rates until inflation is comfortably moving to 2%, markets still see 6 cuts in 2024. There's even a growing 23% chance of 7 interest rate cuts this year. Markets are pricing in a rate cut at EVERY remaining Fed meeting this year. As highlighted by the Kobeissi Letter, if the Fed is on track for a "soft landing," why do we need to many rate cuts? Source: The Kobeissi Lette

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