Interest costs as a share of US corporate profits are near the lowest levels in 40 years
This is partly because many companies have locked in long-term financing at low rates. This has kept profit margins elevated. Maybe companies are better to manage their debt schedule than the US Treasury... Source: The daily shot, Lance Roberts
The end of the rate hikes is typically followed by plateaus before rate cuts begin
The end of the rate hikes may not be here yet, and the Fed has already said a many times for months that the plateau is going to be “higher for longer". How long will the plateau be this time? Source: Wolfstreet
No change as expected
Nothing really new except that they acknowledge strong growth and strong wage gains versus September, effectively upgrading their economic assessment. This is the 3rd time they upgrade their view on growth. Our view is unchanged: we are due for a long pause. High rates is the new normal.
The race to raise rates summarized in one chart
Source: LSEG Datastream, Reuters
When will the Fed start cutting rates?
This chart from James Bianco is derived from market pricing. The first cut is currently priced for August 2024 (top panel), or 337 days away (bottom panel). Notice the first cut is always about 10 to 12 months away. It never gets any closer.
Here's the downside risk on gold. Either this longstanding correlation is broken or inflation is grossly understated and real rates remain negative
Source: Henry Smith
ECB's Lagarde: "Rate cuts weren't discussed, would be totally premature".
Meanwhile, markets see the first ECB cut at April 2024 meeting. Source: Bloomberg, HolgerZ
Welcome to Zombie Land
"There are some serious problems in small-caps, especially in the US. Good luck paying interest without profits. Great chart via Soc Gen showing the distribution of stock forward P/E valuations in the MSCI Europe small cap and Russell 2000 index. Source: SG, Themarketear, Lance Roberts
