The annual interest expense on US debt is literally moving in a straight line higher, now at $1.1 TRILLION.
To put this in perspective, less than 3 years ago the annual interest expense on this debt was $450 billion. That's a 144% jump as total US debt has surged by over $11 TRILLION since 2020. Even in 2008, at the peak of the Financial Crisis, annual interest expense was just $450 billion. As interest rates surge and debt levels hit record highs, the US paying the prices for decades of deficit spending. Money is not "free" anymore... Source: BofA, The Kobeissi Letter
U.S. Households are now spending a record $573.4 billion on non-mortgage interest payments which for the first time in history is roughly the same as mortgage interest payments.
source : Barchart
Surprise, surprise... Even with a hot jobs report and inflation rising to 3.4%, market expectations regarding timing and number of rate cuts have shifted more dovish.
Markets are now pricing-in a rate cut at EVERY Fed meeting this year beginning in March 2024 until December 2024. Effectively, markets are saying that us interestrates will move in a straight-line lower. Source: The Kobeissi Letter
Goldman believes that the 5% EPS forecast for sp500 is too low as a strong economy and falling interest rates should lead to positive surprises
Source: Bloomberg
US Interest expense ~$1.1 trillion as of today
That's $250BN more than the Defense Budget; $250BN more than spending on Medicare, $200BN more than spending on health, and will surpass the $1.35 trillion spending on Social Security this year, becoming the single biggest outlay Source: www.zerohedge.com
Compound interest as the 8th wonder of the world...
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The European Central Bank held interest rates steady for the second meeting in a row, as it revised its growth forecasts lower and announced plans to shrink its balance sheet
ECB's Lagarde: We did not discuss rate cuts at all BUT markets price in 5.3 cuts for 2024. “The Governing Council’s future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary,” it said in a statement. Source: Bloomberg, CNBC
Interest rate futures shift to showing a ~57% chance of rate CUTS beginning in March 2024
Markets also see a growing 9% chance of rate cuts beginning as soon as next month. Futures are projecting a total of FIVE rate cuts in 2024. There's a 28% chance of 6 cuts and an 11% chance of 7 cuts in 2024. Meanwhile, the Fed just said they see just 3 rate cuts in 2024. So markets are still "fighting" the Fed. But the Fed is starting to adjust... Source: The Kobeissi Letter
