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
Switzerland’s inflation forecast backs SNB rate staying on hold
Switzerland’s government sees next year’s
inflation within the central bank’s target range, the latest evidence supporting a likely hold from policymakers this week. Consumer prices will grow at an annual 1.9% in 2024, in line with the previous forecast, the State Secretariat for Economic Affairs said on Wednesday.
Source: Bloomberg
The average credit card interest rate right now has risen to 27.81%
And that's with U.S. credit card debt hitting new record highs north of $1,000,000,000,000 Source: Hedgeye
2024 is expected to be a year of interest rate cuts
Here's what's currently priced in markets of who does what when. Source: Bloomberg, David Ingles
As highlighted in the Kobeissi Letter and in the chart below from Tavi Costa >>> Annualized interest expense on US Federal debt is nearing $1.1 TRILLION
To put this in perspective, 2023 defense spending was $821 billion. This means the US is on track to spend 34% MORE on interest expense than defense spending. In 2023, the US government produced $4.4 trillion in revenue. This means that 25% of receipts in the entire 2023 are equivalent to Uncle Sam's annual interest expense. Rising rates and falling tax revenue are both occurring at the same time. A tricky combination
Futures are now showing a ~45% chance that FED rate CUTS begin as soon as March 2024
There's also a growing (but small) chance that rate cuts begin in January 2024, at 4%. Prior to the most recent CPI inflation data, the base case showed rate cuts beginning in June 2024. There was also a 50% chance of another rate HIKE in 2024. This has been a quick turnaround... Source: The Kobeissi Letter
Since the Fed started raising rates in March 2022, default rates have gone from 1% to 5%+
Source: Apollo, TME
Below the average 3-month ATM implied volatility (max/min range since 2008)
Source: TME, GS
